
Book.-' /r c S"w — 

Copyright W 



COPYRIGHT DEPOSIT. 



Mining Investments 

and 
How to Judge Them 

By 

Francis C Nicholas, Ph. D. 



Third Edition, Revised 
Volume V. of " The Investor's Library " 

Other Volumes of this Library are : 

Pitfalls of Speculation. Investor's Primer. Cycles of Speculation. 

Stock Prices. Art of Wall Street Investing 



NEW YORK 
MOODY'S MAGAZINE BOOK DEPARTMENT 

1912 



VI 



*<& 



Copyright, 1907, by 
THE MOODY CORPORATION 

Copyright, 1909, by 
A. W. FERRIN 

Copyright, 1912, by 

A. W. FERRIN 

All rights reserved 



£'CI.A305849 



CONTENTS 

Chapter Page 

I. The Organization and Financial Development 

of a Mining Company 7 

II. The Organization and Physical Development 

of a Mining Company 17 

III. Why Mining Companies Fail 27 

IV. Success in Mining 35 

V. The Relation of Mining Stocks to the Properties 

Back of Them 41 

VI. Speculative and Investment Value of Mining 

Stock 51 

VII. The Geology of a Successful Mine 59 

VIII. Physical Conditions Which Should Surround a 

Successful Equipment for a Mine 69 

IX. Personal and Business Organization Required 

to Attain Success in Mining 79 

X. Inquiries Which Should be Made Before Ac- 
cepting a Mining Venture 89 

XI. Conditions Under Which a Mining Proposition 

May be Accepted 101 

XII. Conditions Under Which a Mining Proposition 

Should be Rejected 109 

XIII. Investments in Dividend Paying Mining Stocks 117 

XIV. The Spirit of Adventure and Speculation, What 

Some Have Gained ; What Others Have 

Lost 125 

XV. The Prospector and His Agent, Honest and 

Dishonest Work Compared 133 



iv CONTENTS 

Chapter Page 

XVI. The Prospector, the Promoter, the Banker and 

the Investor 139 

XVII. Mining Engineers of Divers Kinds. Some to 

Trust and Some to Avoid 147 

XVIII. The Gist of the Whole Matter 151 

XIX. A Financial Plan Which Should Lead to 

Success in Mining 153 

Appendix. How to Calculate the Values of Mining 

Stocks 154 



PREFACE 

In preparing a preface to this, a third edi- 
tion of " Mining Investments and How to 
Judge Them," I wish first to extend sincere 
thanks to the kind readers who have thought 
well of my efforts and have made a third 
edition possible. I desire especially to thank 
the eminent educators who have done me the 
honor of using my book in their technical 
classes, their lectures and their recommenda- 
tions for courses of reading in regard to 
mining. 

We are now passing through a transition 
period in mining affairs, with a tendency to 
severe criticism which has in many instances 
gone beyond reasonable justice. It seems to 
me that we expect too much of mining, but 
mining stocks are so frequently put forward 
as investments, when the word speculation, or 
venture, would be more fitting, that expec- 
tations are raised which are rarely fulfilled. 
As a usual thing mining cannot come up to 
the standard of an investment, and too fre- 
quently brings only disappointment to those 



vi PREFACE 

who judge mining ventures by investment 
standards. Such disappointments would not 
occur if mining were, held more to its true 
position. Still mining investments are con- 
stantly being discussed, and if the public will 
persist in so considering them it becomes a 
duty to know how, and by what standards, 
they may be judged. For this purpose my 
book was written and has now been carefully 
revised for its third edition. 



The Author 



The Organization and Financial Develop- 
ment of a Mining Company 

If one who casually buys a mining stock, be- 
lieving, so he says, that he is "stuck," yet 
hoping that the reports may prove true , could 
know all the struggle, pathos, hopes, despair 
and moments of triumph attending the effort 
for the financial development of a mining en- 
terprise; one would sympathize with the pro- 
moter, and wonder at the determination, which, 
if success is to be obtained, must meet and 
overcome prejudices, must encounter doubts, 
and incredulous disbelief during years of effort 
to find success in beating down all barriers, 
and obtaining the necessary capital to operate 
the mine. One who is strong enough to obtain 
his end against such opposition is calculated 
to succeed, and usually does make a success of 
his mine after obtaining the money to operate 
it. There is pathos and sorrow in the effort 
because all do not succeed, even though a life 
time is dedicated to the effort. One instance 
comes to my memory. A miner prospecting 

7 



8 MINING INVESTMENTS 

some years ago discovered a mine, and thought 
it a good one; obtained the title and set to 
work to raise the money for its equipment, but 
without success. The mine was in Central 
America, a place not too well esteemed, and 
few would listen to his story. Yet he labored 
on, he and his wife together. Sometimes they 
made a little money at one work or another, 
and then would spend it looking for someone 
who would hear their story, and advance the 
capital required to work the mine. Time went 
by, they grew old together and died in want, 
and the mine was never worked. What pathos 
of hopes and disappointments were hidden in 
these wasted lives none knew, nor is this an 
isolated example. Many are waiting, working 
and hoping today; some will succeed, others 
are doomed to disappointment; but they will 
struggle on, for the mining spirit, like the 
gambling fever, is hard to subdue; and it is 
all so plain to those who own the mines, and 
feel sure as to their worth, that it seems im- 
possible that someone will not harken, and 
take a venture with them, where they them- 
selves have risked their all; and ydl how 
little encouragement is found. If this were 
different, and if people who had money to in- 
vest gave better heed to those who actually 
own a mine, and sought for capital to estab- 



AND HOW TO JUDGE THEM 9 

lish works which they would themselves oper- 
ate, the story of mining would be very differ- 
ent and many permanent successes would be 
chronicled each year; but people doubt the 
miner, who with blunt story and rough ways 
seeks for financial help, and asks for partners 
to share in his venture. So the mining company 
and its financial development comes on the 
scene. The mine owner, weary in his search, 
receives offers that a promoter, banker, broker, 
or other personage will take up his proposition, 
provided suitable terms are arranged. I re- 
member well how one old prospector replied 
to such a proposition. "She's a good prospect, 
but she ain't worth no million dollars; may 
be when she's opened up, but that's not 
now." "Precisely," the promoter said; "we 
capitalize the prospective, not the present 
worth and then sell shares based on the pres- 
ent worth at low prices which advance as 
values are developed; those who put their 
money out for development thus reap the bene- 
fit, and this is what I propose." "Each person 
who invests at prospect prices in a capitaliza- 
tion for prospective worth knows that if our 
expectations are brought to realization his 
profit will be in holding a great number of our 
shares." So the prospect was capitalized for 
$1,000,000. 



10 MINING INVESTMENTS 

This was the first step in the financial de- 
velopment of the mine. When a proposition 
is put forward on this basis and is honestly 
managed, the proposition is fair, but unfortu- 
nately the offering is not always justly man- 
aged and a greater value is placed on the pres- 
ent worth than conditions warrant; and here 
is the first influence which makes for loss in 
mining stocks. Capitalization for prospective 
worth, but the price representing the present 
worth, the money asked for the shares, is often 
more than actual present worth will warrant. 

If a prospect is worth $10,000 and the com- 
pany owning the prospect is capitalized for 
$1,000,000 then the present actual worth of 
shares is 1 % ; and if, as usual, the par value of 
the shares is $1.00 then the actual worth is just 
one cent a share, and on such a basis, and at 
such a price would be well worth buying; but 
this investment would be in nothing more than 
a prospect, and except the shareholders or 
partners, for such they really are, spend some- 
thing on the mine to open it for operation ; and 
then provide machinery to treat the ore, it will 
remain a prospect worth just one cent a share 
and nothing more. This is not good business, 
and one goes at hazard in a mine to make a 
profit, not to hoard money, so funds must be 
provided to operate and work ; and this brings 



AND HOW TO JUDGE THEM 11 

forward the next step in the financial develop- 
ment of a mining company. 

The miner being asked as to the division of 
the shares naturally replies that being partners 
he and the promoter should divide, but this is 
not a satisfactory basis for those proposing to 
promote the scheme: explanation is made 
that in order to raise money shares must be 
sold, and that some must be donated to the 
treasury for purposes of development; so after 
much discussion it is generally agreed that of 
the shares, one-third shall go to the owner, 
the promoters take a third, and one-third 
is placed in the treasury; the old miner, 
doubtful as to what he had done takes his 
paper, yields his titles to the company, and 
goes back to the mine; the promoters under- 
taking to produce funds by selling treasury 
stock to keep him at work. 

This is now the situation, a prospect worth 
in cash $10,000 has been capitalized at $1,000,- 
000, and one-third of the shares must provide 
all the money for operation and development. 
In ordinary business a person contributing the 
total capital might be contented with one-third 
the profits, but would probably ask more and 
would control whatever property the business 
owned. In mining similar arrangements 
should be made, and they who contribute capi- 



12 MINING INVESTMENTS 

tal should not only be preferred in shares and 
dividends, but should be given actual liens upon 
the property to make their preferences secure* 
This is not often done because it is of little ad- 
vantage to promoters, and the offerings are of 
shares alone, usually appearing with glowing 
prospects, and the statement that so many 
shares are in the treasury to be sold at a low 
price, probably twenty-five cents a share. 
Frequently the announcement is made with 
great show of virtue that no officer receives 
compensation for his work, a suspicious cir- 
cumstance, because men cannot afford to work 
for nothing, and do not work for nothing even 
in a mine. It is a better proposition when those 
who promote state exactly what they have as 
profit, and better yet when a mining company 
pays its officials and obtains men competent to 
do successfully the work required of them. 

There seems a tendency among mining pro- 
moters to pose as philanthropists, who work 
for nothing, and with the mining proposition 
under discussion the usual offerings appear; 
the miner has gone back to his mine now in- 
corporated, and obedient to instructions writes 
glowing letters, his own enthusiasm develop- 
ing more and more. What he writes is 
quoted, and the shares begin to sell, not very 
freely, because they never do; and the pro- 



AND HOW TO JUDGE THEM 13 

moters, in order that sales might be made in 
greater volume, offer large commissions, incur 
expenses and offer special terms, so that in the 
end often not more than one-third of the money 
realized for shares goes to operate the mine; 
and this small proportion has to do the work in 
which all the great number of shares have 
equal participation. If of the treasury shares 
one-third are sold at twenty-five cents each, and 
one-third the money realized is put to actual 
work in mine, then the money so placed would 
represent about two and eight-tenths per cent, 
of the capitalization; this, with the one per 
cent, which the prospect was actually worth 
at the beginning makes an aggregate of three 
and eight-tenths per cent, actual value, real 
money, in the proposition, and this small per- 
centage must earn dividends for the total capi- 
talization. So if the old miner is not mistaken 
in his mine, and it does yield shipping ore from 
which a profit can be made, the mine must re- 
turn in profits nearly 200% each year on the 
money actually in the proposition in order to 
pay 6% on the capitalization. There are many 
propositions which do as well as this, but the 
rocks of disaster are never very far away; 
funds are apt to run low, leaving the enterprise 
not wrecked but stranded; and another is 



14 



MINING INVESTMENTS 



added to the long list of mines owned by corpo- 
rations, but not in operation. 

The promoters were eager for very great 
profits, if the mine had paid, as they anticipated 
from the very start, all would have been well; 
but the financial development of the propo- 
sition not being on a secure foundation, nothing 
was provided for contingencies, and troubles 
appearing, the burden of the capitalization was 
too great. This is the history of most mining 
enterprises, though some succeed, even at this 
great disadvantage, and if better provision 
were made, the number of successes would be 
in favorable comparison. 

These are the usual conditions of most min- 
ing propositions though not all ; many are well 
organized, and the investor should learn to 
select those which are organized on proper 
lines, and to show what these lines of proper 
organization may be is the object of the fol- 
lowing chapters. 

It does not cost much to put forward a min- 
ing proposition, and where expenses of pro- 
motion are deducted from the treasury stock 
the promoters take but little risk ; a risk which 
may not exceed the figures in the following 
calculation of expenses for bringing out a min- 
ing proposition at one million dollars capitali- 
zation. 



AND HOW TO JUDGE THEM 15 

Calculation of minimum expenses in bring- 
ing out a mining stock. 

Charter, in one of the cheaper states. . $25.00 

Stock book, ledger and seal 10.00 

Printing the prospectus, 1,000 copies. . 25.00 
Advertising at $25.00 per week for one 

month 100.00 

Postage and office rent (frequently desk 

room) 25.00 

Total $200.00 

One month's expenses, after which it is ex- 
pected that money will be coming in. If the 
stock sells the promoters make a big profit, 
and the mine is operated; if the stock does 
not sell the loss to the promoters is not great 
and they can try again with some new propo- 
sition. 

With such excellent prospects for a profit, 
with mine owners grown weary looking for 
partners to do actual mining, with mines and 
prospects to be had for shares in the companies 
incorporated to take them over, it is little won- 
der that mining promoters are many; yet min- 
ing pays such splendid returns that even with 
the great disadvantages attending the Ameri- 
can system of company promotions, among 
the many who buy mining stocks thousands 



16 MINING INVESTMENTS 

make handsome returns, and win fortunes out 
of such investments ; and the desirable position 
for an investor is to learn how to discrimin- 
ate and select the good from the bad; because 
there are desirable mining propositions brought 
forward constantly, and money is to be made 
if only one uses good judgment in selecting. 

These statements are not idle words. It is a 
too frequent occurrence in the financial de- 
velopment of a mining company that of the 
money subscribed an adequate proportion does 
not go into the property, and the shares sold 
for cash are far in the minority, a basis not 
calculated to be of advantage to those who in- 
vest; and one should look well to this point 
before purchasing. It is like having too many 
partners who have not contributed any cash 
to the business, and if such a proposition is 
offered the investor should demand that the 
mine be pledged as security for the money 
actually contributed. 

When it is found that a proposition is not 
over-burdened with promoters' shares in its 
financial development, or that those who are 
promoting the enterprise are giving full value 
for what they reserve for themselves in shares, 
then the financial proposition is on a fair basis 
and can so far be considered favorably. 



II 

The Organization and Physical Develop- 
ment of a Mine 

It takes money to work a mine, it takes 
money for the equipment; but those who 
manage a mine, and yet are not accustomed to 
the business think that no impediment stands 
against the easy money they expect to win. 
Take out the ore and remit the proceeds, write 
the directors; this is the sense of the meeting, 
and the puzzled miner looks at his instructions 
and sends some practical suggestions as to the 
best methods for opening up the mine, and the 
machinery which will probably be required. 
The directors hold a meeting and generally re- 
solve with great show of wisdom to send ma- 
chinery without delay, effort is made to raise 
more money through the sale of stock, or if 
money is in the treasury it is at once appropri- 
ated; people who have machinery to sell are 
called in consultation; and the next thing an 
equipment is sent out to the puzzled miner, 
and word goes too that it must be placed in po- 
sition, without delay, and returns sent in. It 

17 



18 MINING INVESTMENTS 

is returns, money coming in, that the directors 
want to see; the stockholders expect dividends, 
hurried calls are sent to the manager; but all in 
vain, such is not the way to operate a mine, 
failure almost certainly comes to oppress, 
and once a mining company has failed there is 
poor chance of re-establishing the enterprise. 
That disaster follows too hasty effort at results 
is because, before the character of the ore is 
known, before its proper treatment has been 
ascertained, and often times before the mine is 
even opened, machinery has been bought and 
shipped; the directors expecting it will fit re- 
quirements, and hazarding the money on a 
guess are generally obliged to meet, and to ex- 
plain the disappointments; because machinery 
bought in this haphazard way can hardly be 
expected to give good results. 

An incident of such work as this can be 
found in numerous mines. One which has for 
some years past been prominently before the 
public is a good example. It was a prospect, 
and as such had merit, but neither the charac- 
ter of the ore, the amounts to be obtained or 
the physical requirements had been well es- 
tablished ; yet beneath the magic touch of capi- 
tal great undertakings were commenced, men 
swarmed about the property, shafts were sunk, 
electric plants gave light in all the galleries 



AND HOW TO JUDGE THEM 19 

under ground, mills were in process of erec- 
tion, houses, railway sidings, everything which 
engineering, directed by those who had ma- 
chinery to sell, could devise was being done; 
and after thousands had been spent it de- 
veloped that the machinery was not suited to 
the ore, then other plans were tried; new 
equipment recommended by those who had 
machinery to sell was purchased. Three times 
were failures the sole reward for thousands 
spent, and the mine was brought to such an 
ill repute that where a good result might easily 
have been attained, were debts, a property in- 
volved, machinery of little use; and all just 
struggling to be maintained. Then one of the 
directors, prominent in business life, admitted 
that he was a fool, that is, when it came to min- 
ing propositions; and so he was, and so are 
most men who, as directors of mining enter- 
prises, force the issue, seek quick returns and 
vote to build and establish equipment before 
the mine is opened. Luck may be with them, 
and by chance the equipment may be suited to 
the requirements of the ore, but usually luck 
leads a man astray, and when an investor hears 
of rapid work of equipment and development 
going hand in hand, it will be safe to let such 
propositions go to others ; for where good min- 
ing practice is not well maintained the chances 



20 MINING INVESTMENTS 

of success are very poor. Naturally one may 
inquire, what is good mining practice? This 
question does not admit of easy answer, for 
no two mines are found the same, and what is 
good practice in one would probably lead 
to disaster in another. Yet certain general 
principles can be considered as bearing on the 
question, and these being understood the en- 
quirer can form an opinion as to whether the 
organization and physical development of the 
mine is proceeding as it should. 

Mines may be divided into three classes. 

First, those which produce ores very high 
in value, with every ounce of ore worth care- 
ful handling. 

Second, those yielding rich ores and by their 
indications promising supplies of mineral 
which can be milled to certain profit. 

Third, mines which yield a low grade of ore 
from which a profit can be had, if the product 
can be treated to advantage. 

Then there is another class of mining propo- 
sitions, prospects, indicating that by opening 
up the ground mineral-bearing deposits will 
be found. 

Each class of mines requires different treat- 
ment. Those which yield such rich ores 
that every ounce is worth careful handling 
are rare and the best practice is to take the 



AND HOW TO JUDGE THEM 21 

course usually recommended by boards of di- 
rectors not skilled in mining and get ore, not 
with such eagerness, however, that mining 
operations are so conducted that future work 
must be more and more expensive ; but get ore 
without too much regard for future operations, 
because such mines usually do not last long; 
and though some do continue to great depth it 
may be taken as a rule, to which there are some 
exceptions, that very rich mines do not last so 
long as others, and the best practice is to make 
a drive for all that can be had in values with- 
out great equipment. When such a proposition 
is presented it is fair to take a chance on it, if 
the capitalization is not high ; but where a rich 
ore is reported running into the hundreds or 
even thousands to the ton and a great equip- 
ment is proposed, that proposition is safe to 
let alone, because the chances are that the ore 
obtained will not be worth the cost of the 
equipment. Of course, there are exceptions, 
but chance rules in mines and the chances are 
that a very rich mine cannot be a big mine and 
therefore a big equipment will be out of place. 
The second class, those mines which yield 
good ores, require very different treatment, 
and from the viewpoint of a stockholder, the 
following steps should be taken as good min- 
ing practice. 



22 MINING INVESTMENTS 

At the beginning of the proposition, while 
the mine is still an undeveloped prospect, the 
shares should be sold at a low rate, and the 
money obtained applied to work of develop- 
ment; not to the purchase of machinery or to 
arrangements for selling ore, but to develop- 
ment work and nothing else. The shares should 
advance in price as this work progresses, and 
the presence of ore bodies is established and 
ore reserves are blocked out; that is, opened 
by first sinking down a shaft near the vein, and 
at a certain depth cross-cutting by digging a 
tunnel from the bottom of the shaft to where 
the vein should be; and then finding the vein 
as expected, drifting, that is, tunneling along 
it; then an assured expectation can be enter- 
tained that the vein found on the surface and 
encountered again by tunneling from the bot- 
tom of the shaft extends from the surface down 
to where it has been encountered, all ore, a 
body opened up and ready to be taken out. 
This practice may be varied, but the principle 
is the same, the operations should be to prove 
up a large body of ore before going to the ex- 
pense of erecting machinery. Sometimes the 
mine is so formed that the shaft can be run 
directly on the vein itself, a very satisfactory 
method of proving ore when it can be done to 
advantage ; but usually the shaft is placed near 



AND HOW TO JUDGE THEM 23 

the vein and no attempt is made at burrowing, 
that is, following the irregularities of a mineral 
formation for the sake of always working in 
the ore. This is not now well regarded, al- 
though it was the ancient practice. 

In other mines, where the mineral deposits 
are found high among the mountains, the situ- 
ation admits of tunneling to reach the vein, 
rather than sinking down a shaft beside it, but 
the principle is the same, the object being to 
open up and prove the presence of the ore from 
the top, or outcropping of the mine, to the 
place at depth where the vein is cut; and' 
having established that an abundance of the 
ore is there, the next step is to equip the mine 
with machinery to treat the ore. Good prac- 
tice is to make careful test, and when a plan for 
treatment has been satisfactorily proven the 
plant can be purchased with assurance that 
the mine will be successfu 1 

Where a proposition is presented under con- 
ditions of operation as here outlined, it is a fair 
risk to take a chance, provided that the price is 
right. At first, before the mine is opened, the 
share should be very cheap because everything 
is risk, and if enough shares are not sold the 
mine may never be opened up at all. Then, as 
the work proceeds, there should naturally be a 
gradual advance in the price asked for the 



24 MINING INVESTMENTS 

shares, particularly so if proofs of mineral to be 
found at depth are brought to light; until, 
when the ore is found at depth there should be 
a material advance; and when the ore bodies 
have been drifted on, and proven as to ex- 
tent a good price should be asked for the 
shares. Finally when the equipment has 
been put in place and the mine is set to earn- 
ing dividends a high price should be asked and 
will be had, because then everybody wants the 
investment; and those who took the risk at 
first, and would have met a total loss if ore had 
not been found at depth now have their reward. 

Sometimes long periods pass in development 
work; often it is carried on too far, and 
when once a paying ore deposit is encountered, 
it should be operated, because the object of 
mining is not to develop a fine engineering 
plant, but to get ore and get it with the 
least possible expense. This being held in 
mind, it is fair to take a chance in mining 
where good prospects are reported on the 
authority of one who knows what indications 
really promise good prospects, and those in 
charge of the proposition propose good mining 
practice. 

In the third group or class of mines, where 
lower grade ores are found, good practice is 
the same as has been stated, but it must be car- 



AND HOW TO JUDGE THEM 25 

ried out with greater care, because the equip- 
ment required to make money out of low grade 
ores is very costly. Much money must be 
raised, and before such large amounts are 
risked the presence of a very great deposit of 
the ore must be established; and the mine 
opened up, and proved at several different 
points and places, to establish beyond perad- 
venture that great bodies of ore are at hand to 
supply the extensive plant which must be oper- 
ated to make money out of low grade ores. 

With mines in prospect, that is, mineral 
ground where ore deposits are expected, but 
are not certainly known to exist, all is specu- 
lation, and usually the chance is poor and safe 
to let alone. However, as sometimes strikes 
are made, and prospects worth but a few cents 
a share advance to dollar values over night, 
some people will be willing to accept the risk, 
and if the shares are cheap enough it is a fair 
gamble, nothing more; yet if the management 
is honest and their plans for exploration vigor- 
ously prosecuted, the risk can be taken, but 
only at such prices that if the mine wins out 
the profit will be manyfold the money put at 
risk. 

These general statements give but an outline 
of the different questions involved in the physi- 
cal development of a mine. Incomplete cer- 



26 MINING INVESTMENTS 

tainly, but if the proposition is looked at with 
critical analysis along the line of inquiry here 
suggested an accurate opinion can be formed 
as to whether the physical development of the 
mine is proceeding along lines which indicate 
success. 



Ill 

Why Mining Companies Fail 

The admission must be made with regret 
that most mining companies are failures, but 
while this is true of mining it is also true of all 
companies; for the records show that some 
ninety per cent, of corporations are failures, 
and go out of existence, many of them after 
only a year's existence. This being the fact it 
must be admitted that failures in mining are 
not more frequent than among ordinary corpo- 
rations; still the fact remains that most min- 
ing companies are failures, a large majority of 
them; which in the aggregate represent the 
hopes of thousands come to naught. Why this 
should be when mining is such a profitable 
business seems strange, for one would think 
that records of successes would be more pro- 
nounced, and must look with interested con- 
cern at the causes which produce such bad re- 
sults. The reasons why are many, and those 
who hold mining stocks should take heed of 
these reasons, and perhaps discern approaching 
failure in time to protect their holdings. Oi 

27 



28 MINING INVESTMENTS 

the reasons why mining companies fail, one, a 
potent reason, is scarcely known. It happens 
many times that the stockholders bring about 
the ruin of their own interests, and put bur- 
dens on the efforts of those who have the en- 
terprise in charge which doom the company 
to certain failure. Rarely it happens that 
the progress of a mine is up to expecta- 
tions, delays and difficulties are almost 
sure to be encountered; and then comes criti- 
cism, and they who own the shares bewail their 
disappointment, and declare they have been 
cheated, denouncing often that the undertaking 
is a fraud, and, bringing it in ill repute, make 
further progress well nigh an impossibility; 
and the enterprise discredited becomes a dis- 
mal failure, where a good word in support of 
those who had the enterprise in charge might 
have brought about a great success. If a man- 
agement is found to be dishonest, those who 
have bought the stock should lose no time in 
taking legal action, and not be content with 
idle words of disapproval. Where a manage- 
ment is found to be just, and making due effort 
to attain success, even though disappointments 
are encountered, that management should 
have a good word now and then to help their 
efforts, and it is a poor man who speaks badly 
of that which he owns himself; if he does 



AND HOW TO JUDGE THEM 29 

so, he should not expect anything but deterior- 
ation in the values of his property. 

Here are some of the reasons why stock- 
holders become dissatisfied and criticise. Re- 
sults may not be quick enough to suit them 
for which the management is frequently de- 
nounced. It may be that some who have taken 
a chance on an unestablished mine at a low 
rate wish to sell out their holdings, and in place 
of looking for a purchaser go to the manage- 
ment demanding that the stock be immediately 
repurchased from them; forgetting that those 
who have gone in together to prove up an un- 
tried mine are in fact, if not in law, partners, 
the money which has been subscribed must 
be applied for work on the mines to benefit 
them all, and that managers who are so en- 
gaged have not the time to leave their work 
and hunt up a purchaser; then it may be that 
the mine requires all the money which the 
managers can raise, and to divert some of this 
money to repurchasing shares which holders 
may wish to sell might work serious injury to 
those who are not seeking to dispose of what 
they hold. For these reasons, while a mine 
is going through its stages of development 
those who buy should do so with the full un- 
derstanding that such shares bought at low 
prices must be held and put away till the mine 



30 MINING INVESTMENTS 

has been developed, then, of course, shares can 
be freely sold. 

This cause of failure, the denouncements of 
those who have purchased stock, is one far 
reaching cause why mining enterprises fre- 
quently end in disaster, because when once 
adverse criticism is in circulation the manage- 
ment can no longer sell shares to keep up the 
work, and then the enterprise becomes a fail- 
ure. 

Another among other many causes leading 
on to failure is that competent engineers are 
not employed. Probably no cause is more pro- 
lific in unfortunate results. A miner once said 
to me that when a man had made a failure at 
everything else he took up mining, and soon 
considered himself an expert. This is a good 
criticism, but the man who made it was him- 
self a most outrageous failure, and well illus- 
trates the criticism. He was pleasant, aggres- 
sive, a talker, knew it all and more ; persuaded 
people to place money with him and then ob- 
tained for them no results of any kind, not even 
a property held under title. Here we have a 
frequent cause for failure, and if those who 
thought of buying mining stocks would assure 
themselves that those who were to have the 
management were competent there would be 
few bad investments made in mining. 



AND HOW TO JUDGE THEM 31 

As stated in a previous chapter an over capi- 
talization where less than a due proportion of 
the stock is represented by cash, or real prop- 
erty, tends to make mining unprofitable for 
those who have invested. Frequently we hear 
that such or such a mine is making money, but 
the capitalization is so high that nothing can 
be paid in dividends; a condition which may 
continue during many years, and such a mine 
cannot be spoken of as a success. This adverse 
condition of over capitalization should be 
counterbalanced by security on the property 
itself with preferences for interest for the bene- 
fit of those who may invest money in the enter- 
prise. 

Among the causes which lead on to failure 
a form of dishonesty called "graft" in current 
slang is very potent, and hard for stockholders 
to control; perhaps it never will be held in 
check, and it is mingled with all the forms of 
dishonesty which may be practiced in a busi- 
ness such as mining while the enterprise is 
being organized where at the start untried men 
and unestablished usages are brought together, 
new equipment, new accounts, everything un- 
tried; it is small wonder that efficiency of re- 
sults are often low and that at a time when 
mistakes are apt to bring on a disaster money 
misapplied means ruin. Dishonesty is very 



32 MINING INVESTMENTS 

prone to visit all human affairs, and as yet no 
really well established form of checking up 
against it has been developed; yet in mining 
it could be done if the stockholders gave more 
attention to their own interests, and had in- 
dependent auditing committees which might 
call for reports at any time, and make actual 
physical inspections, employing competent 
engineers to give them information as to what 
the true conditions might be on a mine, then 
there would be very few losses from misappli- 
cation of the funds. Unfortunately stock- 
holders are so indifferent that there is small 
chance that auditing at sudden, and unexpected 
times will become the custom; and inefficient 
application or perhaps misappropriation of 
funds will always be a potent factor among the 
causes why a mine is not brought to success. 
To watch this condition is not easy, but where 
it is found that promised results are not ob- 
tained, and the management cannot give a 
good reason why this is so, the stockholders 
should take steps to have committees formed 
to make investigations, and if necessary place 
a new management in charge. 

Another very frequent cause for disappoint- 
ment of results is that machinery set up to do 
the work of winning values from the ore will 
not give such returns as were expected, and 



AND HOW TO JUDGE THEM 33 

frequently the enterprise must then be aban- 
doned or closed out to other people because 
lack of funds will not permit the management 
to purchase and set up other kinds of ma- 
chinery. Against this difficulty a prospective 
stockholder has poor opportunity for protec- 
tion, and can only ascertain that the plans for 
treatment of the ore were drawn up by men 
who are competent in such work, and who are 
not themselves interested in selling machinery 
on which they reap a special profit. 

To all these causes why a mine may fail 
there is the ever present possibility that the 
ore may not hold out, that its character may 
change and not be suitable for treatment with 
the machinery which has been established ; but 
where the mining practice has been good the 
loss from this contingency should not be so 
very great, because, before great expense has 
been incurred for machinery with all the cost 
of setting it in place, the mine will have been 
tested, the veins and deposits proved, and then 
the heavier expenses of equipment are not such 
a risk. 

I do not call that mining enterprise a failure 
which undertakes to see what there may be in 
a likely prospect and finds inadequate supplies 
of ore. If honestly put forward to those who 
may invest, and the plain statement made that 



34 MINING INVESTMENTS 

it is on a prospect omy that the hopes are based, 
then if money is properly applied the results 
for which it was subscribed have been accom- 
plished, and any enterprise which accomplishes 
that which it has undertaken cannot be called 
a failure. In opening up a prospect the object 
had in view is to ascertain whether or not the 
indications will lead the operators to paying 
ore, and money so lost can be considered spent 
in legitimate enterprise and efforts — and stocks 
in exploration companies have great possibili- 
ties to win most excellent returns. A disaster 
is different from a failure in mining. A disaster 
is loss. A failure in mining can be considered 
as such only when ore has been found and the 
management fails to obtain adequate returns. 
Whatever may be the miscalculation if the 
mine produces ore and does not make money 
for its stockholders that mine is a failure. 

The conditions which have been noted are 
those which principally cause disasters or fail- 
ures in a mine, and people who think of making 
an adventure of capital in a mining proposition 
should study the conditions, and take the risk 
only after favorable indications have been 
proven, or at least strangely indicated from an 
independent source of information. 



IV 

Success in Mining 

A good old saying often heard is "Nothing 
succeeds like success ;" a better rendering 
would be, nothing succeeds like mining. Not 
anywhere are such profits made, nor in any 
calling are there such sudden tidings of 
good fortune. A stock selling for a few cents 
a share develops an unexpected demand, and 
presently is worth a large amount of money; 
so much that in many instances a few hundred 
dollars have returned abundantly and the for- 
tunate possessor finds sufficient income to live 
comfortably for a lifetime. Such results are 
worth a risk, and so many instances have been 
known that there is always a chance that even 
in the most discredited stocks a strike may be 
made and great returns result. It may be so 
provided that the mine is in operation, for be- 
tween the stocks of dormant mining enter- 
prises, and mines which are in operation there 
is such a difference that the same conditions 
which would be favorable in one would be ad- 
verse in the other class, and, when considering 

35 



36 MINING INVESTMENTS 

success in mining, the two classes of stocks 
must be taken as entirely different. A mine in 
operation has always a chance of an achieve- 
ment, and a great success. A mine lying dor- 
mant has no chance at all, till some arrange- 
ments have been made by which the mine may 
be put in operation, then it may attain a great 
success, or like any other mine it may drag on 
for years and come to nothing in the end. 

Success in mining for the stockholder is to 
select and make investments where profits are 
obtained, and such results develop out of care- 
ful mining practice, good management and 
honesty in operating a property of merit. In 
making his selections the investor is at some 
disadvantage, for he must take the statements 
made by others, but in forming an opinion one 
should know the elements and the conditions 
which most probably will lead on to success. 

We would all like to invest a little money, 
and have it win a competency; and it can be 
done in mining if one understands the con- 
ditions of the venture, and waits till the right 
opportunity arrives. This is an important point 
to be considered; if one would make a success 
at mining, one must wait till a real opportunity 
arrives. An opportunity does not come with 
such great frequency, and usually a good min- 
ing proposition does not have to seek very far 



AND HOW TO JUDGE THEM 37 

to obtain backers, for which reason those min- 
ing propositions seeking capital by much push- 
ing, advertising and inordinate claims for 
values must be considered as most doubtful, 
and safe to let alone. An incident will illus- 
trate the fact. An advertising writer making 
a specialty of mining literature said recently: 
"Well, for the last eight years I have been 
writing up the dope for mining propositions 
and have seen sixty or more draw good money 
from investors. " Asked how many of these 
enterprises had been successful he replied that 
only one had turned out well, another might 
have given good results but the superintendent 
was dishonest to such an extent that a receiver 
was appointed and the mine closed out to 
others. 

In sixty mining propositions one only was 
successful, and how is the investor to pick the 
one when all the others, though great promises 
are made, are unsuccessful. Rules for judging 
a mining proposition will be attempted in a 
later chapter, the object had in view at present 
is to describe successful mining and the differ- 
ent stages of development which lead up to 
success. 

It is a favorable indication when the mine 
seeks capital from general investors, that those 
who have the enterprise in charge are not de- 



38 MINING INVESTMENTS 

pendent on the product of the sale of shares 
for their own livings; and more than this can 
and do risk some money for their own account, 
and where such is the case it is a fair propo- 
sition to join in with them. The first step in 
the development of a successful mine is that 
people of some responsibility are interested in 
it. Such people usually proceed with caution, 
and inform themselves before they take a risk. 
A mining proposition brought to good business 
men has been considered, and they are im- 
pressed by what is said ; usually their next step 
is to send for and obtain such local informa- 
tion touching on the property as may be avail- 
able; and these reports confirming what they 
hear, the next step is to call a competent 
geologist, who is asked to give an opinion on 
reports and samples; and he, thinking well of 
what he sees, is sent out to examine, and find- 
ing that the ore deposits promise well advises 
that the business men take up the proposition. 
Probably an agreement is now made with those 
who own the property, the business men 
take up the enterprise, and their next step is 
to send out a mining engineer, who passes on 
the proposition in its engineering features, and 
finding that the mine admits of successful oper- 
ation makes his report and recommends equip- 
ment. Before this equipment is purchased ar- 



AND HOW TO JUDGE THEM 39 

rangements are made to open up the property, 
and prove that the ore is there in quantities, 
which the geologist found indicated; and now 
a contract to a competent miner is let out. The 
business men apply business methods, and 
make contracts for their work, the same as 
would be done in any work of construction; 
they do not undertake to forward money 
for day labor to be performed in a distant place. 
The miner having the contract sets to work, 
and after a few days begins to send reports 
showing that the mine is opening as the geolo- 
gist expected, and the indications seem most 
favorable. But about this time the business 
men find that the money required makes quite 
an investment and they resolve to seek aid 
from investors. A plain statement is then 
drawn up, showing just what the values are, 
the prospects, the reports which have been 
made; not "dope" and flamboyant literature, 
but a plain concise statement of the facts and 
with it offering stock at a fair valuation. It is 
natural that an offering such as this would find 
eager buyers, and usually the acquaintances, 
associates and friends of the practical business 
men supply all the money which may be re- 
quired to meet the payments, on the contract; 
then when this contract has been carried out, 
and good bodies of ore have been proven to 



40 MINING INVESTMENTS 

exist, and, usually a mine examined and re- 
ported on favorably by a competent geologist 
and a competent mining engineer does turn out 
well, and the ore having been proved, the 
next step is to set up the machinery. An- 
other statement is prepared showing the values 
which have been proven, and subscriptions are 
asked at better prices for the stock, but prices 
based on actual values, and prety certainly the 
offering is quickly taken. Then a competent 
mining engineer is put in charge, other con- 
tracts are let, presently the machinery is 
all in place and put in operation, and it is but 
natural that a mine so managed will be suc- 
cessful and yield full returns for many years. 

Unfortunately, such good management is 
rare, and those who know so little about min- 
ing that they proceed without any caution are 
frequently in charge, and with flamboyant 
dopy literature, and glowing advertisements 
promise the immediate returns they so confi- 
dently expect, and glorious fortune easily ob- 
tained. If only such great promises could be 
fulfilled there would be many rich; most un- 
fortunately, however, success but rarely follows 
efforts at hurried, little skilled and speculative 
mining. 



The Relation of Mining Stocks to the 
Properties Back of Them 

A question which should be among those 
most carefully considered is, what may be the 
relation of the stock offered to the property 
back of it. In other words, what does the 
stock represent? It may be a share in actual 
ownership, it may be a share in contingent 
ownership, it may be a share in prospective 
ownership, it may be a share subject to previ- 
ous liens or it may be a share with but limited 
rights. All these different conditions affect 
values, and one who buys a mining stock surely 
ought to know what it is, and what it really 
represents. 

Whatever may be the form of ownership the 
question of share divisions is very important. 
It is of small consequence what the capitaliza- 
tion may be, the important matter is how many 
shares are there? If a mine were capitalized 
for one million dollars, and there were only 
one share, that share would be a title to the 
whole property, and would be worth whatever 

41 



42 MINING INVESTMENTS 

the mine, option or contract might be worth. 
If the par value of the shares were placed at 
one hundred thousand dollars each, there 
would be ten shares in the million dollar capi- 
talization, and each share would be worth one- 
tenth of the value of the whole property. If, 
however, the shares were of one dollar each, 
as is usually the case in mining corporations, 
there would be one million shares and the 
value of each share would be one one-millionth 
of the value of the whole property. This fact 
must be carefully held in mind when one pro- 
poses to buy a mining stock. How many shares 
are there? What the capitalization may be is 
of not any importance. A mine capitalized 
with only ten dollars and only ten shares of 
one dollar each is exactly the same in ratio to 
value as a mine capitalized for one million dol- 
lars with ten shares of one hundred thousand 
dollars each. There would be ten shares in 
each instance, and whatever the mine might 
produce would be divided in ten equal parts, 
and each share would get a tenth. Similarly 
if a mine were capitalized for one hundred mil- 
lion dollars with shares of one hundred dollars 
each, and another mine were capitalized for 
one million dollars with shares of one dollar 
each, both mines would have one million 
shares, the ratios of ownership would be the 



AND HOW TO JUDGE THEM 43 

same and each share would be entitled to one 
one-millionth of the product of the property. 
From this it will be seen that the par value of 
the shares is an idle thing not to be considered. 
The question is how many shares are there? 
And it would be better if mining companies 
were incorporated with no specified par value 
and were offered to investors as so many 
shares. A mine divided among a million 
shares, a mine divided among a hundred thous- 
and shares, or a mine divided among a thous- 
and shares. The incorporation laws of the 
United States require that a par value should 
be specified, and under these conditions the 
best an investor can do is to disregard the par 
value and inquire only as to how valuable the 
mine may be and how many shares there are 
among which to divide the products of the 
property. 

This being in the mind of an investor, and 
having inquired as to what the mine may be 
worth and how many shares there may be, it 
is next in order that inquiries should be made 
as to what the shares may represent. If it is 
actual ownership the conditions are the best, 
and where a mine is so held it must be shown 
that the property has been fully transferred to 
the company, that there are no restrictions in 
the title and that the company is the owner, 



44 MINING INVESTMENTS 

free and clear, an actual estate in fee. Unless 
the mine is so held the stocks are risky propo- 
sitions, and except the prospects are far better 
than the ordinary, had best be let alone. 

Where a property is held under contingent 
ownership, the company will own the property 
in case it complies with certain conditions 
which it may or may not be able to carry out. 
A company incorporated to take a property 
under bond and lease is one instance. If it 
has the amount required the company will own 
the property, and the shares will represent 
something; but if it does not succeed in pay- 
ing the amount required, it will forfeit all its 
rights in the mine, and the shares will repre- 
sent nothing, and if an investor thinks of buy- 
ing under such conditions he should weigh 
well what the chances are that the company 
can meet the requirements; for if it does not 
the shares can never have value of any kind at 
all. 

Many of the rich mines in Spanish Ameri- 
can countries are held under concessions, not 
titles, and a concession is nothing but a con- 
tingent interest. The company is given the 
property provided that within a stated term of 
years it will complete some work of public 
utility, usually an expensive road to be con- 
structed from some part of the country to an- 



AND HOW TO JUDGE THEM 45 

other ; or public buildings or other utilities may 
be specified as the work required, and in every 
case the title is contingent on the completion 
of the work. Such properties are nothing but 
contingent interests, and frequently very 
doubtful ones at that ; for those who grant the 
concessions are shrewd men, a Yankee isn't in 
it with a Spanish American when it comes to 
arranging a contract in which a sharp bargain 
is concealed, and usually those who hold the 
concession find that to fulfill the conditions 
under which the occupancy of the property has 
been granted requires an amount of money 
much greater than was expected; and if the 
conditions are not fulfilled, and the public 
works are not delivered in the time specified, 
then the shrewd Spanish American officials 
simply carry out the terms of the agreement as 
its specifications require, call on the company 
to complete its bargain; and if it fails they 
simply take back the property again with all 
the improvements which may have been placed 
upon it, and the shares of that company then 
represent nothing, not even dormant owner- 
ship. 

Thus many dangers are sure to visit the 
company holding property under a contin- 
gency, and who buys shares in such an enter- 
prise should have a care and see just what the 



46 MINING INVESTMENTS 

chances are, and how strong the company may 
be to give assurance that the title will be suc- 
cessfully completed. 

Another form of mining proposition causing 
frequent loss is one in where the shares offered 
represent prospective ownership and nothing 
more. Usually such shares are issued against a 
contract to acquire a property or an agreement 
to explore a property, and take it over if found 
satisfactory. The stocks of the exploration 
companies generally belong to this class of is- 
sue. Where property is offered with a clear 
statement of what the shares really represent 
this basis of organization is a just, legitimate 
and often a very profitable form of mining 
speculation. Frequently the true facts are not 
stated with clear precision, and the investor 
subscribing to an exploration company, or to a 
company organized to test a mine, or one in 
which there is simply a lease, is given the im- 
pression that the assets are in a stronger po- 
sition than really is the fact. As stated, how- 
ever, this is often a desirable form of mining 
speculation, but the shares should be either of 
very low price, or there should be very few of 
them. 

Frequently an exploration company is or- 
ganized with a very few shares. Perhaps ten 
men may each put a certain amount of money 



AND HOW TO JUDGE THEM 47 

in a pool, and send an expedition to explore for, 
and acquire mines, and certainly the enterprise 
is legitimate. Another form of contingent 
ownership is where indications of mineral have 
been found, and a company is formed to search 
the ground, and if found promising to acquire 
title. This too is a legitimate form of oper- 
ation, and many successful ventures have been 
made in such enterprises. Another form of 
prospective ownership is the lease where the 
company owns nothing and can only own such 
ore as it may be able to take from a property 
in a given time, less the royalties, or payments 
which must be made to the owner of the prop- 
erty, so much percentage of the value of every 
ton of ore the leaser may take out. The own- 
ership in such an organization is simply the 
prospective ore the company may succeed in 
winning from the mine. Such enterprises have 
been very profitable, but are not permanent 
except when a long lease has been obtained, in 
which event a longer life may be expected for 
the enterprise; but in any event the capitaliza- 
tion should be low, that is, there should be 
only a few shares; or if there are many the 
prices should be very cheap, and an investor 
should look to it with great attention to ascer- 
tain that the enterprise is in competent hands. 
Those companies which are organized sub- 



48 MINING INVESTMENTS 

ject to mortgages or previous liens are rarely 
to be well considered, and are often very de- 
ceptive, because a better value can be indicated 
than the facts will really warrant, and yet those 
who put the enterprise forward may keep well 
within this law; for what importance is it that 
a mortgage, or a lien for payments, should be 
on a mine such as the property the promoters 
are putting forward; a few shipments and all 
the mortgages and liens will be paid, at least 
so the promoters think and if the investor 
thinks so too he should take a chance, but a 
wise investor would make pretty thorough in- 
vestigation before placing his money at such 
a hazard. 

Companies issuing shares with limited rights 
are not so many in this country, though pref- 
erence shares are not uncommon, called usually 
in this market preferred shares; but in foreign 
companies obligations to pay out of the earn- 
ings, large proportions to founders, discoverers 
and others often burden a mine to such an ex- 
tent that the shares have very little real value ; 
especially if the preferences are in the form of 
obligations to be paid first before the shares 
have participation. These arrangements give 
the shareholders but limited rights in earnings, 
and should be carefully investigated. Other 
limitations may restrict the value of the shares, 



AND HOW TO JUDGE THEM 49 

and one, which is present in almost every min- 
ing proposition, is the limited voting power 
which is granted to the purchased shares, the 
shares which represent the real money which 
may have been invested. According to the law 
each share has equal voting power, but if one 
man holds the majority of the shares, or if this 
majority is held by a group of men closely as- 
sociated, they can vote as they fancy, and do 
just what they please with any property. 
Elections of officers under such conditions 
mean nothing, the promoters appoint them, 
that is all ; and where it is found that the shares 
representing actual money invested are in a 
hopeless minority the investor should look well 
to the character of the men with whom he is 
taking the risk, for if they are not competent 
in mining as a business, results are apt to be 
very unfavorable, even though the mine they 
have in charge may be most excellent. 

The fact that promoters, and organizers, 
usually control a corporation by shares voted 
to themselves is, in the opinion of the author, 
the paramount evil in mining investments, the 
one unfortunate condition which if remedied 
would make mining stocks one of the best, if 
not the best form of speculative investment. 
The people who have provided the money 
represent in most cases only a minority inter- 



50 MINING INVESTMENTS 

est, and must submit to the will of the ma- 
jority — in most cases the promoters and or- 
ganizers. Sometimes those who control fall 
out and begin fighting among themselves; 
then those who have invested receive but 
scant consideration. They represent a scattered 
minority unknown to each other, and can do 
little in their own defence. The object of this 
book is not to theorize, or suggest legislative 
remedies. It Would be well if laws were 
enacted to protect a minority of stockholders 
who had invested money against a majority 
interest in a corporation who had, at the or- 
ganization, voted shares for property, but had 
really taken most of them for their own ac- 
count; but such laws have not been passed. 
No matter what the relation of the stocks may 
be to the property back of them, if a closely 
associated majority interest is in control the 
investor must depend on those men, and on 
those men only. Therefore it behooves those 
who risk money in mining carefully to scruti- 
nize the stock lists, and find out who is in 
control; this is really more important than 
the conditions of organization. 



VI 

Speculative and Investment Value of 
Mining Stocks 

The question of what value to place on a 
mining stock is one involving several calcula- 
tions. A mine is worth the value of the ore 
it may contain, less the cost of getting the 
value out, and turning it into money. If the 
mine being considered is a gold proposition 
the question of turning the product into money 
may be disregarded because the product is 
money. With all other mines the question of 
converting the product into cash must have 
serious attention. 

A mine may be compared to a treasure vault 
in which there is money, but how much the 
owners cannot surely tell, nor have the means 
of ascertaining with great accuracy, and it 
would be difficult for them to say what they 
were worth. So with a mine, it is a treasure 
vault in which the amount to be obtained is 
hidden, and there is also an added inconveni- 
ence, that each time the treasure vault is 
opened, each time values are extracted from it, 
considerable amounts of money must be spent. 
To such great extent must money be expended 

51 



52 MINING INVESTMENTS 

that frequently it happens that visits to the 
treasure vault may, and frequently do, result in 
expenditures greater than the worth of the 
materials taken out. What then is the value 
of an opportunity to take values hidden in the 
treasure vaults of the earth? Value the oppor- 
tunity must have, else mining stocks could 
not be sold, nor would large amounts be ex- 
pended in making an entrance of shafts and 
galleries in seeking after these treasures which 
are unseen, but which indications promise. 
The inference is largely speculative, and as 
the ground to be opened, even in the well es- 
tablished mines, is always an expectation, not 
a known condition, the element of speculation 
is present always in a mining enterprise. Even 
where no ores are known certainly to be pres- 
ent yet where strong geological indications 
make expectations reasonable, there must be 
some value. It is a chance to make some 
money, a chance difficult to reduce to any basis 
of firm calculation, for if a man felt sure and 
considered it a demonstrated certainty that he 
would make a sum of money in a given tran- 
saction, a gain of ten per cent, would be suf- 
ficient to warrant the undertaking. So in a 
simple calculation we may assume that a 
chance to make some money which may be 
considered secure is worth ninety-one per cent. 



AND HOW TO JUDGE THEM 53 

of the amount involved as a first investment. 
If the risk increases, the amount of worth for 
the value of the risk falls lower, and a man 
who would be glad to put out money on good 
security to gain ten per cent, would hesitate to 
put out the same money on doubtful security 
even though the gain, if made, would be twenty- 
five per cent. Naturally he would ask for special 
provisions if the risk were taken, and if the 
profits indicated were very great he might be 
induced to take a risk to a limited amount 
of money ; and this is the risk which is taken in 
the purchase of a mining stock. It is worth 
something and the rate can to some extent be 
calculated. If an investor buys a stock on the 
expectation that it will return him double the 
money he has risked it is fair to consider that he 
was willing to put out money on what he 
thought were good expectations that it would 
be doubled, and would make for him one hun- 
dred per cent., as it is commonly called ; that is 
double his money. If a stock is bought at one- 
fifth what the investor is led to expect he may 
obtain, then he takes a risk to recover his 
money and four times the amount as well, of 
four hundred per cent, profit, as it is somewhat 
erroneously called, because a per cent, is a 
decimal of a hundred and cannot really apply 
to more than one hundred parts; but it has 



54 MINING INVESTMENTS 

become a common usage to speak of gains be- 
yond one hundred per cent, and used in this 
sense one hundred per cent, has come to mean 
one fold, and five hundred per cent, return is 
taken at the meaning of five fold return, or 
five times the amount put out obtained as a 
profit more than the original investment; and 
as money has come to be expressed in dollars 
and hundredths of dollars or per cents., the 
usage is not inconvenient and as it expresses 
clearly the meaning one would convey it may 
be considered a development, not an error, in 
a language. 

Using per cent, in this sense we may say that 
a stock selling at 50% of par is taken for 100% 
profit if the purchaser expects that it will sell 
at par. Similarly a stock bought at 20% is 
taken to obtain a profit of four hundred per 
cent. A stock bought at 10% of par is taken on 
the expectation of winning nine hundred per 
cent, and a stock taken at one per cent, of par 
is purchased on the expectation of winning 
ninety-nine hundred, almost ten thousand per 
cent profit. Such profits are possible in min- 
ing, and we can speak of the speculation value 
as a venture for a hundred per cent, winning, 
or as a venture for winning many thousand per 
cent. The actual worth of such a risk, and 
opportunity is of an equation so variable and 



AND HOW TO JUDGE THEM 55 

fluctuating, that the only calculation which 
can be made for the speculative value, is to 
take the actual value of a mining stock, and 
add to it an allowance for the speculative 
value, but this allowance will be each man's 
opinion. The investment value of a stock can 
be calculated, and this being known, what 
would one give in addition for the stock be- 
cause of the speculative value, the chance in 
every mine that some great body of ore of high 
worth may be uncovered; and the further 
chance that a paying mine may continue as it 
is for many years and so become a source of 
long continued profits. 

In the course of mining events, and all the 
chances of the hazard a mine must some time 
in its history reach a point where no more min- 
eral can be had at a profit, so the chance of loss 
is equal, and perhaps more imminent than the 
chances of greater gain. 

In considering an investment value of a 
mining stock the calculations can be based on 
something more tangible than the uncertainties 
of unknown values. Where good mining has 
been practiced, the mine has been opened up, 
reserves of ore are established, geological 
studies and surveys carefully made, and ma- 
chinery constructed which the mine can keep 
supplied for many years. Then a calculation 



56 MINING INVESTMENTS 

based cm known, or at the worst, probable con- 
ditions, becomes more of a certainty; and the 
geologists of a well established company can 
say ore is in assured supply for such and such 
a term of years, and that the expectations of 
increased values, and the continuation of the 
veins and deposits can be reasonably counted 
on for such and such a term of years. 

On this information a value for the shares 
can be calculated. If the mine is reported on 
as good for five years with prospects, that the 
assured values will continue, and further re- 
serves of ore will be opened up, then the mine 
is on a five year purchase basis, and if the 
price of the shares is such that the net divi- 
dends will be just 20%, then all the speculative 
values are obtained for nothing, because at 
20% the money invested will be returned in 
five years and the mine has five years supply 
of ore in sight, then all which remains repre- 
senting the speculative values will be clear 
profit. Usually the owners of such a property 
want something for the speculative values, and 
what is paid beyond the five dividends or 20% 
valuation may be considered the price one pays 
for the speculative value. 

If a mine is reported to be good for ten 
years dividends one might consider buying it 
on a 10% basis, and at that rate one's money 



AND HOW TO JUDGE THEM 57 

Will be returned in ten years, and whatever the 
mine is worth at the end of ten years will be 
the profit; but if by chance there is a mistake 
in the estimates of the ore, and not so much is 
obtained as had been expected then there is a 
loss on the investment ; on the other hand bet- 
ter and more extensive ore deposits may be 
encountered; though ten years is a long period 
and the element of chance cannot be eliminated 
but it may be f ortun? te, and if the calculations 
of ore in sight have been made by competent 
people it should not fall below the estimate. 
If ten years supply is in sight and one buys at 
a rate to pay less than 10% then the difference 
is what is paid for the speculative chances. 
Similarly a supply of ore to last for 20 years 
may be reported, then if this is proven one 
could buy on a 5% basis, and in twenty years 
all the capital would have been returned and 
whatever the mine might be worth at the end 
of that period would be the profit. From these 
estimates we may assume that the speculative 
and investment values of mining stocks go to- 
gether and cannot be entirely separated; con- 
sequently one who buys should take both ele- 
ments into consideration. The proven values 
should give the money again in a certain term 
of years which one may calculate from the 
dividends being paid, and the reserves of ore 



58 MINING INVESTMENTS 

in sight as estimated by competent authority; 
these are the investment values and one can 
calculate how much they are worth, and if one 
pays more than this one should consider the 
difference between the price paid and the in- 
vestment or known values, as the price he pays 
for a chance to make some money and thus 
consider carefully whether the opportunity and 
expectation is of that much value. 






vn 

The Geology of a Successful Mine 

In place of this chapter a volume could be 
written, and then the subject would not be 
exhausted. The object of the present work is 
not a scientific treatise, or even a guide for en- 
gineers. Such ambitions are far beyond our 
objects which are simply to give the facts 
which will bear on the advisability of accept- 
ing a mining proposition, and some little in- 
formation touching on the relation of mining 
to geology will be desirable. There are many 
forms of ore deposits, and of these large de- 
posits moderately rich are more favorable than 
small but immensely rich formations. An as- 
say tells very little of what may be expected 
from a mine. Suppose a mine ran fifty thous- 
and dollars to the ton, as sometimes has been 
found; it sounds attractive, but usually such 
deposits are so very small that they scarcely 
pay for working. If this fifty thousand dollar 
ore were taken from a seam, or pay streak, less 
than an inch wide, the mine would not amount 
to much, because great tunnels or expensive 
shafts would have to be opened to get at the 
ore; and when one did get at it there would 

59 



60 



MINING INVESTMENTS 



not be enough to compensate for the expense, 
and thus we can see that the important ques- 
tion to consider is not how rich but how abund- 
ant an ore may be. A mine having hundreds of 
thousands of tons of ore easily worked, and 
worth ten dollars per ton would be a mighty 
fortune, where a mine containing but a few 
tons of fifty thousand dollar ore might not give 
any returns beyond the expense of opening the 
property, and, perhaps, even not so much as 
this; for the expense of opening tunnels, and 
sinking shafts might easily amount to more 
than the value of the ore obtained. 

The question, therefore, in first considering 
a mine is not how rich the ore may be but how 
much there may be of it. A big mine is the 
best though rarely yielding the richest ore. 

Of the different forms of ore deposits we 
have most commonly vein formations, and in 
almost every prospectus the claim is made that 
the deposits occupy true fissure veins, and 
when such claims are presented it would be 
just that the prospective investor should ask 
the promoters to prove it. Fissure veins are 
rare, and in their largest meanings indicate 
fissure or cracks in the earth's crust caused by 
some great seismic action, and extending to the 
depths of the interior earth far beyond the 
point to which man's efforts can follow them. 



AND HOW TO JUDGE THEM 61 

Cracks in the rocks, though they may be ex- 
tensive, are not fissures in the earth's crust, 
and should not be spoken of as fissure veins; 
yet everywhere we find the claim made, true 
fissure veins, but of these there are few well 
defined examples in all the world; and for a 
long time it was claimed that in America true 
fissure veins were not to be found at all, but 
this is not the fact, and several have been re- 
ported on by eminent authorities. 

A fissure in the earth's crust, and cracks in 
the rocks, these two are commonly claimed as 
fissure veins, and is not a crack a fissure? 
Certainly it is, yet a fissure vein is not a crack 
in the rocks, but a former great opening in 
the earth's crust which has become filled up 
with mineral bearing ores. A fissure vein 
must be large, the sides or walls well defined, 
it will extend for some distance, and pass 
through two or more different rock formations, 
but if the ore deposit is found occupying a vein 
in one rock formation only it is usually a crack 
or local fissure in that formation. It may be 
large and of importance, but it can never be 
so large as a fissure in the crust of the earth 
passing through all rock formations down to 
unknown depth and should not be called a fis- 
sure vein. 

The formation of ore deposits such as 



62 



MINING INVESTMENTS 



are usually worked, may be for ordinary 
usage divided into but three classes, though 
scientifically many other classifications are 
required to accurately describe the different 
forms of ore accumulations. For ordinary in- 
vestigations it is sufficient if we consider the 
three kinds of ore deposits as follows: Those 
which have been derived from mineral bearing 
solutions, and crystallized, percipitated or re- 
placed out of the solution; next those which 
are simply accumulations of the ore by me- 
chanical means, and, finally those which are 
eroded out of the surrounding rocks, and have 
collected in gravel, or sand beds, called placer 
deposits. All these forms present numerous 
modifications; the mines formed from mineral 
bearing solutions generally belong to periods 
of heated activities during which fissures were 
developed in the earth's crust, and cracks, and 
gaping rents were formed among the rocks; 
and heated waters, rising vapors and chemi- 
cal changes exerted their influences to form ore 
deposits. Subsequently waters proceeding from 
the depths of the earth forced upward, or perco- 
lating downward from the surface, or following 
drainage zones among the rocks dissolved out 
minerals, on their way encountered sulphides, 
and first rusting and then dissolving them be- 
came acid, thus increasing their activities in 



AND HOW TO JUDGE THEM 63 

dissolving minerals, till they became over- 
charged; and as a result threw down some of 
the burden in cracks, rents and cavities or fis- 
sures; continuing the action for a long, long 
period of geological formation; continually de- 
positing a little and a little, till at last the veins 
were filled, and the mineral bearing solutions 
were forced, perhaps, among all the surround- 
ing rocks forming outlying trailers as it were to 
the main deposits. Sometimes a mineral bear- 
ing acid solution will have encountered a for- 
mation of alkaline rocks, limestone, etc., the 
alkalie will be easier to carry than the other 
minerals so the solution takes up or dissolves 
alkalies and deposits minerals in their places; 
and similarly lime waters which are alkaline, 
and may be mineral bearing, will, on coming in 
contact with acid rocks, take up the acid ele- 
ment to neutralize the alkalies and deposit min- 
eral in the place. Under some on$ or another 
of these forms the ore deposits found in veins, 
seams, cavities, cracks, contacts, replacements 
or fissures will have been formed ; but the only 
questions which interest the investor are how 
big is the deposit in which I am asked to take 
a share? How rich is the ore? And will the 
mine continue production long enough to re- 
turn a profit on the money which I may invest? 
To answer these questions one must be in- 



64 



MINING INVESTMENTS 



formed of all the intricate science of economic 
geology, but a few indications can be given, 

A mine found among the rock formations 
should occupy a well defined space, the larger 
the better; and the ore should be fairly even 
in appearance, texture and assay valuation. 

The ore should show values in a reasonable 
distance from the surface, two to fifty feet; 
there have been notable exceptions, but as a 
usual condition a mine does not grow richer 
at a greater depth. For a time values increase, 
then deeper still decrease, and when the water 
level has been reached the permanent values are 
developed and usually these are not so great by 
far, and sometimes the mine becomes so lean 
that further work must be abandoned because 
it will not pay. 

Other forms of ore deposits are developed by 
mechanical accumulations; these are iron de- 
posits, coal beds, zinc or lead accumulations as 
residuals from rocks which have been wasted 
away ; and less abundant chromium or manga- 
nese deposits, residuals from rocks which have 
contained these elements. Here a mechanical 
action takes place, the material is accumulated 
through the influence of erosion or the decay 
of rocks ; or, in the case of coal deposits, the ac- 
cumulation of vegetable material with such 
rapidity that, continually piling up, it is pro- 



AND HOW TO JUDGE THEM 65 

tected from the air and cannot oxidize or decay, 
and so carbonizes to form coal. The petroleum 
deposits are taken to have originated from fats 
of animals, and the oils of plants, collected 
where they would be protected from the oxida- 
tion of the air, and gradually the change has 
taken place too for petroleum. Thus by me- 
chanical means we find that many mineral de- 
posits have been accumulated. In some, both 
mechanical and chemical influences work one 
with the other, as in the precipitated salt beds, 
gypsum beds, iron ores of some regions and 
other minerals; but the mechanical predomi- 
nates and in relation to all these deposits the 
questions which the investor will ask are in 
regard to size and purity, for deposits of less 
valuable ores and minerals must be large and 
very pure; and also so situated that they can 
be transported at low rates, if the proposition 
is to yield a profit. If deposits of this class are 
found to be large, to yield pure materials and 
to be so situated that the product can be car- 
ried to a market at a good profit it is fair to 
take a portion of the proposition, provided that 
the price is reasonable. 

Those ore deposits called placers in which 
the material sought is found mingled with 
sand, gravel or other products of erosion are 
usually productive of the precious metals, gold, 



66 MINING INVESTMENTS 

platinum, and to its allied minerals and also 
precious stones, and certain of the rare ele- 
ments used in the arts. The development of 
such deposits is of great interest, and usually 
the various stages of formation can be traced 
in sequence; the washing down, and breaking 
away of rocks among the mountains, and the 
hills ; the grinding, crushing and gradual wear- 
ing down of this material in the streams and 
water courses and finally the collection of the 
precious metals, rare elements, or rich gem 
stones at convenient places. With these for- 
mations the questions which should be asked 
by an investor relate more particularly to the 
facilities for working the deposit; for if these 
are good, a deposit which is large though really 
lean in mineralization may be worked to very 
great advantage, and substantial profit. If it 
is big enough — that is the great and all im- 
portant question and should be considered 
with special care when investigating any ore 
deposit. Bigness, however, is but a relative con- 
dition, for in a gold mine a vein two feet wide 
and well defined would, if it carried good 
values, be of great importance; but as an iron 
or coal mine would probably be considered not 
worth operating unless the mineral were very 
pure, the conditions for mining unusually fa- 
vorable and a market just at hand. Size is 



AND HOW TO JUDGE THEM 67 

therefore relative and it may be considered 
favorable when it is large for the kind of min- 
eral which the deposit may yield. 

Another condition of geological formation 
which should be considered in relation to a 
mining proposition is the structural formation 
of the surrounding rocks. If these are very 
hard the cost of tunneling and sinking shafts 
will be great, perhaps so great that a loss may 
result where a profit had been anticipated. On 
the other hand, if the rocks or surrounding 
formations are too soft the cost of supporting 
the tunnels, and openings, so that they will 
not cave in may be very great, and a heavy 
charge on the operations; then, as sometimes 
happens, the insecure formations may collapse 
causing loss and often death. The proper con- 
dition is one where the rocks are firm enough 
to hold in place with reasonable supports, and 
yet are not so hard that mining will be at- 
tended by more than ordinary expense. 

Still another condition must be considered, 
as it may be very adverse to profitable oper- 
ations, and this is faulting. The earth's crust 
is frequently in destructive movement and 
sometimes it happens that a mineral deposit 
apparently good at one place may be found 
shattered and destroyed at another, so that 
profitable working is not possible. To inquire 



68 MINING INVESTMENTS 

whether faults may be expected and give an 
intelligent report requires skill and long prac- 
tice, and even then no one who understands 
the science of economic geology will speak 
with great assurance. In a general way it may 
be said that if a mine is located in a country 
where seismic activities have been in evidence, 
and the rocks are found broken and distorted, 
then faults may be expected and the investor 
should proceed with caution. 

The presence of water may seem to some 
scarcely a geological condition surrounding a 
mine, yet it is a most important condition and 
one which must be reckoned with and watched. 
The water which accumulates in a mine must 
be pumped out; pumping is expensive work, 
and may eat continually at the profits to such 
an extent as to sometimes make a mine un- 
profitable. 

This chapter is but an outline, yet the prin- 
cipal conditions have been noted, and an in- 
vestor who informs himself in regard to these 
and finds the conditions to be favorable, will 
be justified in taking a venture in the property 
offered to him, but if the conditions do not 
seem favorable then it would not be well to 
take the venture, but look for something in 
which favoring geological surroundings can be 
found. 



VIII 

Physical Conditions Which Should 

Surround a Successful Equipment 

for a Mine 

A mine may be equipped with the best ma- 
chinery and materials for its operation, but this 
is not sufficient to insure favorable results. 
The equipment is necessary, but if the physical 
surroundings are such that the machinery can- 
not be operated to advantage the equipment 
may be a total loss. It seems strange that such 
a question should be considered, and that those 
who have an enterprise in charge do not for- 
see the difficulties ; but frequently they do not, 
and one abundant cause contributing to lack of 
foresight, is the hope which all possess, the 
eager expectation, the belief that conditions 
will turn out to advantage. These feelings 
with statements from mining engineers, es- 
pecially engineers who have machinery to sell, 
that they can design and set up a successful 
plant, lead on to expenditures which a study of 
the physical conditions would have deterred. 

An incident in explanation. One of the most 

69 



MINING INVESTMENTS 



successful mining engineers and promoters 
spent many thousands of dollars, it is stated, 
on a mine where there was an abundance of 
good ore situated on a certain coast. The ore 
was to have been shipped by steamers, but 
when preparations had been made it was found 
that neither steamers or any kind of vessel 
could approach the coast, and that the ore 
could not be shipped; a detail of physical sur- 
roundings, which, in the eagerness to win the 
great supplies of ore, had been entirely over- 
looked. To the powerful mining interest back- 
ing the venture the loss, though considerable 
was not disastrous, and the proposition was 
abandoned. If it had been a mining company 
raising money from the sale of stock, another 
would have been added to the long list of min- 
ing ventures resulting in a total loss. 

When, in the history of a mine, the period 
comes in which machinery is to be ordered, 
dependence must be placed on the skill of min- 
ing engineers ; and while they may make griev- 
ous mistakes at times, usually the equipment 
they recommend after due examination of the 
property will do the work; but too frequently 
incompetent men are employed, or, worse yet, 
a so-called practical miner is put in charge and 
then disaster will be almost certain. 

The science and practice of mining is divided 



AND HOW TO JUDGE THEM 71 

into three distinct branches in the hands of 
the geologist, the metallurgist and the mining 
engineer. The geologist reports, or should re- 
port, first giving a clear statement of the 
ore formations, the probable extent of the ore 
bodies and the physical conditions which sur- 
round the mine to facilitate or retard its oper- 
ations. The metallurgist should then study 
and report on the treatment which the ore may 
require in order to extract the metals success- 
fully. The mining engineer should then take 
these reports and design his machinery to 
meet the conditions which may have been 
found, provided, of course, that physical con- 
ditions have not been encountered which indi- 
cate that no profit can be had in operating the 
mine. The work of the geologist and metallur- 
gist can be, and frequently are, undertaken by 
one man ; but the preparation and designing of 
machinery requires such a different train of 
thoughts and education that the mechanical 
and scientific parts of mining do not combine 
to advantage in the hands of one person; and 
this is a frequent cause of loss through errors 
when geologists and metallurgists attempt to 
design machinery, or when engineers attempt 
to make the geological reports. One not being 
trained in the specialty of the other overlooks 
some details resulting often in disaster for the 



12 MINING INVESTMENTS 

enterprise. When an investor is asked to take 
a venture in a mining proposition he should in- 
quire whether the reports have been made by 
competent and qualified men, and that an engi- 
neer has designed the machinery who is not 
only qualified and competent but is also dis- 
interested, and is not to profit by the sale of 
certain machinery which he may recommend. 
If the question of designing the machinery is 
in competent hands, of an engineer who has re- 
ceived reports from competent people so that 
he is well informed as to the conditions with 
which his equipment must contend, the investor 
can ask no more; and expectations for success 
are on a strong foundation. If, on the other 
hand, the investor learns that the different ex- 
aminations and surveys have not been carefully 
made by competent men, and that the mine is 
taking a long chance on expectations, then in- 
quiries should be in order and certain con- 
ditions looked up with care. Those conditions 
which may prevent the successful consumma- 
tion of plans in mining ventures are, some of 
them, as follows : Often a mine may be abund- 
antly rich but inaccessible to an extent that the 
cost of setting up machinery would be so great 
that profits could not be made. The recent de- 
velopments of mining interests in the State of 
Nevada are to some extent an illustration. 



AND HOW TO JUDGE THEM 73 

Years ago these mines, which with better trans- 
portations are now in eager demand, were 
known and some of them even located, and in 
places attempts at working them were made, 
but almost all gave no results ; the costs were 
everywhere too excessive, and for years Ne- 
vada lay a great abandoned camp. Tales of 
riches came from time to time but always little 
heed was given, conditions for maintenance 
were too unfavorable, machinery would then 
have been too costly in such remote places; 
and even now mining must struggle with ad- 
verse conditions of transportation in Nevada, 
and some must wait till better facilities can be 
provided. In former years I frequently had 
offers from prospectors with requests that I 
would introduce them to men of capital who 
might be induced to provide money for making 
and maintaining mineral locations in Nevada. 
But in those days mining propositions had but 
little favor, and no one cared to risk money 
against the then adverse conditions in the 
deserts of that state. Probably this was an 
error of judgment, because to acquire a prom- 
ising mineral deposit and hold it till conditions 
for its operations become more favorable is al- 
ways good business, yet to attempt operations 
on the same mine while the conditions are still 
adverse may be the height of folly. 



74 MINING INVESTMENTS 

This question of accessibility is one of the 
most potent physical conditions which may 
retard successful mining, and millions of dol- 
lars have been lost in attempting to set up 
machinery in distant places, usually because 
the plans are too ambitious, and the machinery 
too heavy for the difficulties which must be 
overcome during the transportation. This, 
however, is not the only adverse physical con- 
dition. 

Sometimes machinery requiring an abund- 
ant supply of water is sent where water is not 
under good control, or perhaps cannot be had 
at all. Particularly is this true of hydraulic 
mining propositions, where a heavy head, or 
fall of water is required to be conducted 
through iron pipes and then directed with great 
force against the gravel beds, with which the 
precious metals are found mingled ; and, wash- 
ing down the gravel cause it to be carried by 
the water through long sluice ways where the 
gravel is washed off, and the gold dust being 
of greater specific gravity settles down and 
when the water has been turned aside, can be 
collected. A very simple process and if mis- 
takes have not been made in calculating the 
supply, the fall and the means of controlling 
the water, profits are almost certain to be ob- 
tained. When such a proposition is presented, 



AND HOW TO JUDGE THEM 75 

the investor should make sure that the sup- 
plies of water have been surveyed by com- 
petent men and if not, then special inquiries 
should be made before accepting the venture. 

Another physical condition working on ad- 
verse influence in hydraulic mining is that the 
beds may be so situated that there is no con- 
venient place to dispose of the gravel after it 
has been washed through the sluce boxes. It 
is a common practice to wash this gravel into 
water courses, but at some places this is not 
permitted, at others it cannot be done, and the 
gravel piling up may soon put an end to mining 
operations. In some cases the gravel can be 
elevated and carried off by a heavy head of 
water which will rise to a level higher than 
that of the gravel bed; but such, however, 
is not always available and an investor should 
see to it that means and places are at hand 
where, in gravel mining, the accumulations of 
washed out material can be conveniently dis- 
posed of. 

In treating ores which must be crushed and 
ground it happens sometimes that the ma- 
chinery is not strong enough to reduce the ore 
to a sufficiently fine powder in order to extract 
the minerals, a matter which should never be 
an impediment, but which frequently works 
great disadvantage in a mining proposition; 



76 MINING INVESTMENTS 

and even well known mining engineers have 
been at fault by not providing machinery of 
strength sufficient to withstand the strain. 

Where ores are to be smelted it often hap- 
pens that fluxes, that is, material which will 
help melt the ore, are not at hand, or being at 
hand the cost and difficulties attending their 
delivery at the works are such that operations 
show a loss. A simple matter such as this has 
many times caused ruin in an enterprise where 
more careful investigations would have saved 
the loss of time and money. 

Always in every mining proposition there 
are difficulties which must be overcome before 
the machinery can be operated with success, 
and often physical conditions which are of 
themselves but simple matters have been over- 
looked. Those which principally work to im- 
pede the successful development of a mining 
proposition have been noted, and an investor 
of discernment can by making inquiries ascer- 
tain whether the physical surroundings are 
favorable or are adverse, and whether all have 
been studied and reported on by competent 
men of good reputation. To pass on the 
physical surroundings of a mine does not re- 
quire great skill, the questions are largely prac- 
tical, relating to means of transportation, easy 
access for shipment, facilities for maintenance, 



AND HOW TO JUDGE THEM 77 

supplies of water, abundance of timber, sup- 
plies of materials for smelting, the relative po- 
sition of the ore bodies to the fall of water, 
where such is required, and the strength of ma- 
chinery which may be required in treating the 
ore; and where a competent man has passed on 
these an investor may be warranted in placing 
some money in the venture, provided other 
conditions, the supply of satisfactory ore and 
the general prospects promise well. 

Among the other conditions, political inse- 
curity and surroundings dangerous to health 
must be considered, though these, strictly 
speaking, are not physical conditions. 

When political insecurity is apparent the 
organization must be strong enough to pro- 
tect and defend its own interests. It would 
be the height of folly to invest in a plan to 
send a few prospectors to work a rich gold 
mine surrounded by hostile Indians, though 
the same place might be successfully operated 
to great profit by a strong, well equipped ex- 
pedition. Similarly, a weak enterprise in a 
country of a semi-barbarous nature, or where 
the administration is notably corrupt, would 
hardly commend itself to a judicious investor. 

The fact that many regions where valuable 
ores abound are unhealthy is a serious consid- 
eration, and in some such regions mining opera- 



78 MINING INVESTMENTS 

tions can be successfully maintained only at 
great expense. A weak expedition would have 
no reasonable chance of attaining success. 
Many times I have seen expeditions set out full 
of hope, and fairly well equipped, only to meet 
with disaster. In many instances few of those 
who went out have returned. Truly Nature 
guards her treasures with a jealous hand. 
Difficulties should not deter a person from 
an effort to secure the treasures, but an in- 
vestor should risk his money judiciously, and 
take the hazard only where it is shown that 
intelligent consideration has been given to 
the difficulties and suitable preparations made 
to meet and overcome them. A certain bravado 
of procedure, and contempt for suggested 
dangers is usually a forerunner of disaster and 
a judicious investor would naturally avoid 
such propositions. 



IX 

Personnel and Business Organization 

Required to Attain Success in 

Mining 

Probably the claim that mining is a difficult 
business will not be disputed. The technicali- 
ties where trained skill is required are many, 
yet though the fact is well-known, men who 
have no adequate information in regard to the 
science and profession of mining engineering, 
are so frequently in charge of mining enter- 
prises that it is well said that any one thinks 
he can run a mine successfully; a mistake at- 
tested by the numerous disasters which fol- 
lowing mining ventures. 

I have been called on to examine many un- 
successful mining enterprises where I have 
found doctors of medicine, doctors of di- 
vinity, lawyers, journalists, brokers, farmers, 
army officers, sea captains, in fact men of al- 
most every calling in charge of the enterprises, 
and it is scarcely worth while to add that the 
mines were unsuccessful. 

One would think that a doctor of medicine 

79 



80 MINING INVESTMENTS 

would hardly be calculated to make a success 
of mining, yet there are many who make the 
attempt, and I cannot recall one who has been 
successful. Of the doctors of divinity and 
plain ordinary ministers there are some, but 
the "golden rule" does not seem to fit well; 
perhaps the ministers are too confiding, at any 
rate they are usually most woefully "stuck," 
and come out of it with anything but credit. 
When lawyers leave the work of corporate 
organization, and financing the enterprise, to 
take up the physical management of a mining 
property they are about the easiest proposition 
a designing operator or mining engineer with 
machinery to sell can encounter, and the list 
of failures in mining enterprises managed by 
lawyers is very long and painful. 

A young lawyer was sent to Alaska during 
the former days of excitement and speculation. 
He had a good trip, superintended the invest- 
ment of a million or so of dollars on behalf of 
a company of such prominence that its name 
was known throughout the country. The 
whole scheme was unfortunate, results were 
not adequate; the man was honest, brilliant, 
trained in legal technicalities, a splendid lawyer, 
but the relationship between the expenditures 
and the compensating results which must be 
looked for he did not understand. Why should 



AND HOW TO JUDGE THEM 81 

any one expect that he would obtain results? 
And as was natural, the enterprise was a fail- 
ure absolute in total, and the stock is worth 
not one cent a share today. To mukiply illus- 
trations would serve little purpose; one more, 
however, will be instructive. A young lawyer 
was sent west during the rougher days of de- 
velopment in that section of the country. He 
undertook to manage a mine where a tunnel 
was to open up a large ore deposit. Work was 
ordered, the young man was made much of, 
progress was rapid and reports satisfactory. 
A long tunnel was in construction, nicely but 
not heavily timbered, paid for at contract 
prices ; and the snow deep on the mountain did 
not impede the work. But when the spring- 
time came melting snows revealed a lot of col- 
lapsing timbers on the mountainside; the 
miners had simply tunnelled through the 
snow. Dishonest? Of course it was, but the 
young lawyer had been stuck, and the money 
was lost just the same. Dishonesty is so com- 
mon in mining that only those who have been 
trained to know when work is proceeding 
properly can expect to contend successfully 
against it. 

Of all the people who without the necessary 
training attempt to manage mining enterprises 
lawyers make the most failures, though some 



82 MINING INVESTMENTS 

lawyers do make great successes; but usually 
they have surrounded themselves with com- 
petent, trustworthy engineers, geologists and 
mine operators. 

To enumerate instances would be of little 
value. The history of enterprises managed by 
people who do not understand the require- 
ments of the work they have undertaken ; who 
do not know good work, and cannot distin- 
guish it from bad, have but one ending — 'fail- 
ure, and so probably it will always be. 

Of more use and interest is it to inquire of 
the successes in mining operation, in order that 
an investor may seek for similar organizations. 
One would not care to invest in a bake shop 
which a shoemaker proposed to set up, and 
operate; nor in any business which a man 
without the necessary training was proposing 
to establish; a carpenter could not operate a 
tailoring shop, nor could a cook be expected to 
make successful work of house painting; yet 
not more out of place than these are some who 
undertake to manage mining operations. 

Surely it is a simple matter of inquiry to as- 
certain whether those who ask for money with 
which to operate a mine understand the work 
which they propose, and common sense should 
prompt one to seek participation in mining 
operations with mining men; competent men 









AND HOW TO JUDGE THEM 83 

trained to the work, and better yet, with those 
who have made records for success. There 
are mining engineers who, in a few hours, can 
obtain almost any sum of money for mining 
operations, because many people know that 
they have been successful, and are eager to 
participate in enterprises which they recom- 
mend. This is good practice, and right pro- 
cedure on the part of an investor; not only to 
seek investments with those who understand 
what they are undertaking, but to seek also 
practical mine operators, for there are many 
who understand the business, and have fol- 
lowed it as a business, not a technical pro- 
fession. I refer to people who actually oper- 
ate mines, not brokers in mining shares, for 
they rarely know much of actual mining and 
where they attempt to manage operations in 
place of speculations, usually make disastrous 
failures. One can buy stocks through brokers 
and one should look to his broker for accurate 
information in regard to the properties whose 
stocks they handle. Where a broker is a care- 
ful student of values, and conditions, his 
guidance is most valuable, and through deal- 
ing with competent, trustworthy brokers many 
investors have made comfortable fortunes 
through investments in mining shares. There 
are, unfortunately, many brokers and agents 



84 MINING INVESTMENTS 

handling mining stocks who are not worthy of 
confidence; so many such, in fact, that mining 
stocks have become discredited to an ex- 
tent that they are frequently spoken of as a 
reproach, when in reality they are the most 
profitable ventures which one can undertake; 
the only investments where a small amount of 
money can make profits which are sometimes 
a competency for the fortunate possessors. To 
be successful requires many precautions, not 
the least of which is to know the people, the 
reliability of the man who recommends, the 
capability of the men who propose to operate 
and something of the business organization. 

In all walks of life there are dishonest men, 
hosts of men are incompetent, the vast ma- 
jority of all men are failures ; why then should 
mining come in for such severe treatment of 
public criticism, when there are, perhaps, more 
successes and greater returns in legitimate 
mining than in any other enterprise? 

Plain business methods should apply, and 
this introduces the subject of the business or- 
ganization. It may consist of a well fur- 
nished office, a big safe, a stock book and a 
talkative promoter. Probably there will be 
prospectuses, maps and numerous samples. 
An outfit such as this should make one 
cautious 1 and whenever the flag is put out, 



AND HOW TO JUDGE THEM 85 

as it were, to catch the eye, the investor should 
beware. What he should look for is an organi- 
zation which will be useful to the work pro- 
posed, not attractive furnishing to catch the 
eye; and not to place too much reliance on 
specimens shown by people on whose state- 
ments one cannot thoroughly rely. A story is 
told of how it happened once in London that a 
broker in mines had sold a property, and 
among the samples he had shown was one of 
great beauty, white quartz studded with gold, 
a specimen to be desired. The mine had been 
disposed of, and a friend who had helped in the 
transaction said to the broker : "Now the mine 
is sold you do not need the specimen, let me 
have it for my collection." The broker hesi- 
tated, took up the pretty piece of ore, stroked 
it and then said: "No, you can't have it; this is 
the third mine I have sold with that sample 
and I think I need it in my business." 

Here is a criterion on business organization: 
bright specimens and show; if it is to sell the 
stock it will be in this form ; if it is to work the 
mine it will be in another form; one will be 
arranged to attract the eye, the other to facili- 
tate work for the mines. Where the object 
in view is simply to sell the stock, the attract- 
ive will predominate; where facilities to work 
for the mining operations are considered, prac- 



86 MINING INVESTMENTS 

tical and often inexpensive equipment will be 
found. The atmosphere of a place to catch 
the fancy is so different from that of a place 
organized to accomplish some practical work 
that one should not be deceived. If doubt 
is caused by the surroundings one should in- 
quire what the plans might be for business 
organization, and should be shown plans such 
as practical business men would approve. 
The office, at the financial center, where the 
mine is being offered, should be good enough 
to enable those who have the work in charge 
to exhibit successfully the maps, reports and 
specimens, and to show the special advantages 
of the property seeking capital for its oper- 
ation. They should show what it is costing 
to raise the money through sale of shares ; they 
should show what work is being done on the 
property they represent, or what money is be- 
ing accumulated to provide for work; they 
should show the names of men on the board of 
directors who are competent to pass on propo- 
sitions relating to the practical operation of a 
mine ; they should show suitable arrangements 
for obtaining their machinery, and competent 
reports of the requirements which it must fill 
in order to win money from the ore; they 
should show their system of accounts, and 
how they propose to check up the expenditures 



AND HOW TO JUDGE THEM 87 

with the results obtained; they should show 
what arrangements are in progress for the 
organization of the working force at the mines, 
and the system proposed for checking up the 
daily expenditures, and accounts; they should 
show what systems they propose, or have es- 
tablished, for taking care of the mineral which 
may be obtained; if the proposition is one 
handling products which must be marketed 
they should show what arrangements are being 
made for handling the sales department and 
finally they should show that they have the 
services of a competent mining man, or better 
yet, mining engineer to have charge of the 
operations at the mine. If on investigation it 
is found that these particulars of organization 
are not receiving much attention, then it is 
pretty evident that they are not thinking of 
mining, but only of selling stock; and on gen- 
eral principles their proposition is safe to let 
alone. 

It is not fraud only against which an investor 
must be on his guard. There may be honesty 
of purpose, yet serious error. " Hell is paved 
with good intentions " ; and it would almost 
seem that good intentions while following a 
will-o'-the-wisp were the principal causes for 
loss in mining securities. But why these hopes 
and expectations? Why expect so much more 



88 MINING INVESTMENTS 

of mining than of any other pursuit? Some- 
one told the enthusiasts and they believed it — 
that somebody was a designing, perhaps a 
dishonest, mining engineer or geologist; a 
man who knew what he was talking about, 
and who was, because of his technical educa- 
tion, in a position which would command 
attention. It is a comparatively common say- 
ing among many mining engineers of a certain 
class " get them started, and after their money 
is in they must put up more to protect what 
they have previously risked." The engineers 
and geologists want work, and they overdraw 
the picture of the profits to be obtained, and 
underestimate the cost of equipment. The 
work is started, but in many cases, especially 
where funds are to be raised by the sale of 
stock, a critical time comes, more money is 
called for and it cannot be raised. Then 
the enterprise goes to smash. This in the 
opinion of the author is one of the worst features 
in mining, and the only protection for the in- 
vestor is to look up the record of the engineer 
or the geologist. Have his specifications been 
adequate? If they have not then be careful, 
no matter how eminently learned the gentleman 
may be, no matter how important his academic 
standing. 



Inquiries Which Should be Made Before 

Accepting a Mining Venture; 

How to Make Them 

There is scarcely a limit to the inquiries 
which one could make in regard to a mining 
proposition; a few, however, are essential, and 
from these one can form a clear idea of what 
the opportunities may be. Of one thing a per- 
son may be absolutely sure, no mining propo- 
sition can be offered which is not worth in- 
vestigating ; and if one but investigates wisely, 
and selects desirable propositions one will be- 
come rich through successful mining invest- 
ments. Many a proposition will be found lack- 
ing in merit and not worthy of an investment, 
but all are worth investigating, because only by 
investigation can one find the desirable propo- 
sitions. 

In making the inquiries one should first 
ascertain what the proposition really is in 
regard to its present status, that is, at the time 
when one is asked to embark on the venture. 
The prospectus will tell of shafts and gal- 

89 



90 MINING INVESTMENTS 

leries to be opened, mills which are to be 
erected, estimates of earnings will be quoted, 
and dividends to be paid will be mentioned. 
As a matter of fact the mine may have none of 
these things, and whether it gets them or not 
will depend on whether the promoters suc- 
ceed in selling the shares to provide money to 
pay for the proposed improvements; and hav- 
ing secured the money there is still a question 
as to whether the results cited in the pros- 
pectus will be attained even after the money 
has been raised, for all managements are not 
successful. The first inquiries therefore should 
relate to what the mine really is at the time of 
investment. Let the prospective investor make 
the following inquiries : He should ask to see 
the original reports which the engineers or 
geologists have made. In these reports he 
should find an accurate description of the 
property, as the geologist found it. If such 
description is not in the report, then the in- 
vestor may well decide that the promoters are 
proceeding without definite information, and 
are therefore showing indications either of in- 
capability or dishonesty, and the investor can 
let the proposition alone. 

He should next inquire what actual money 
has been expended, first in the acquisition of 
the property, and after that in the improve- 



AND HOW TO JUDGE THEM 91 

ments which have been made. His next step 
should be to compare the reported cost of, and 
the improvements on the property under his 
consideration with the cost of similar proper- 
ties and improvements which have been made 
on successful mines. Usually the figures can 
be had by getting the annual reports from 
several different mining companies which are 
successful, and comparing the costs and re- 
sults at these properties with the costs and re- 
sults at the mine in which he is asked to in- 
vest. If it is seen that the proposition he is 
considering is being operated at a much 
greater cost than were the successful mines, 
then it is evident that mismanagement is in- 
dicated, and he should not invest, because no 
matter how good a mine may be, if it is mis- 
managed it will not be profitable for the stock- 
holders. In making investigation for efficiency 
the investigator must remember that a new 
proposition can never be on as good a work- 
ing basis as a well organized and established 
property, but if there is a very great discrep- 
ancy then the new proposition is not being 
operated to reasonable efficiency and should 
be let alone. 

Having found what the actual state of the 
property is, the next inquiry should be what is 
the property actually worth in money, not 



92 MINING INVESTMENTS 

prospects. This actual worth is often difficult 
to ascertain, but in every mining country there 
are bankers, brokers and dealers in mining 
property; and one can write to some person 
situated near the mine in question to ascertain 
at what rates mining property can be pur- 
chased. If one is considering a mining invest- 
ment, it is worth while to write such letters, 
because by this means one may very often hear 
of really desirable propositions to be had at 
low rates, or rather, at fair rates ; because min- 
ing property if it is good for anything is cost- 
ly. Having ascertained approximately what 
the worth of similar property may be, one can 
make an estimate of the actual worth of the 
proposition in which he is asked to invest. 
This actual worth divided by the number of 
shares in the proposition gives the actual worth 
per share. This represents the actual present 
worth, but the shares must be of greater value, 
the prospect must be good and worth some- 
thing, else the shares would not be worth buy- 
ing. To calculate what is being paid for the 
prospect, the chance of making a big profit, 
take the actual worth of a share and subtract 
it from the price at which they are offered. 
Now we have the question — is the prospect 
worth the amount represented by the differ- 
ence — the most difficult question in mining, 



AND HOW TO JUDGE THEM 93 

for it deals with speculative quantities, and 
conditions which can be estimated but not 
surely known. To proceed in estimating what 
the chances are one must compare the propo- 
sition offered with the early conditions which 
were found in successful mines and properties 
which have turned out winners to the great 
profit of their owners. To obtain this infor- 
mation one can visit the public libraries, and 
look back among the old files of the mining 
journals of the dates corresponding to the 
period of the first history of any great mine; 
and there pretty certainly will be found accu- 
rate descriptions and published reports, or, if 
these are inaccessible, one can send a subscrip- 
tion to one of the better class mining papers, 
and ask for information as to the early history 
of some two or three mines which he would 
like to compare in their earlier or prospective 
stages with the property in which he is asked 
to invest. He should seek the technical mining 
papers for his information; the mining press 
which deals with questions of investment 
values has, up to the present time, been of but 
little service. The technical papers are man- 
aged by men skilled in the technicalities of 
mining, and will have the best authorities on 
mining among their contributors; and any in- 
formation which may be had from them will 



94 MINING INVESTMENTS 

be worthy of careful thought and consider- 
ation. They will treat, however, only of tech- 
nical subjects in their relations to mining; in 
regard to investment or speculative values 
they will have very little information. Such 
points the investor must decide for himself. If 
he has good judgment in selecting mining in- 
vestments he can make a fortune, but if after 
four or five trials he finds that his judgment 
has not been good then he had better seek 
some other field of industry for his ventures. 
When one has received the information in re- 
gard to the early history of great mines it will 
be found, in the majority of cases, that the 
properties have been great from the start, that 
the exposures of ore have been large and have 
attracted wide attention. One will find, on the 
other hand, that in only a few instances have 
inferior showings of mineral led to great mines, 
though there are some notable exceptions. 
One may judge and be warranted in the opin- 
ion that where there are great ore exposures 
the prospective value is worth a considerable 
amount of money, and in some instances may 
warrant a very high price for the shares, much 
more than the total of actual values existing 
before development. If it is a medium ex- 
posure of ore, and expectations are entertained 
that on opening the property greater values 



AND HOW TO JUDGE THEM 95 

would develop, the prospective value is worth 
something more than the actual selling values 
at the time this stock is offered. Especially is 
this true if the ore exposures are of a quality 
which will pay for mining, and treatment to 
extract the metals ; but if the ore exposures are 
of poor quality, not sufficiently valuable to pay 
for the working and milling; or if there are 
only inferior amounts exposed though the 
quality may be good, and the mine to pay must 
find larger ore deposits, the stock is worth 
very little more than the actual selling value 
for the property, and if there is no selling or 
actual value then the stock may be considered 
worthless, though one might give a few cents 
a share for the chance that something valuable 
might be found, especially if the speculation is 
in the hands of capable people. 

In making these investigations one must 
trust very much to others. Investing money 
is intrusting it to others who will use it and 
pay for the privilege; and as some can be 
trusted, and some cannot, and as some are suc- 
cessful and some are not, an investor who 
would make money on his investments must 
find men who combine the two qualities; they 
must be trustworthy and they must be suc- 
cessful in the line of enterprise for which they 
solicit the co-operation of capital. In mining 



96 MINING INVESTMENTS 

one will secure better returns with the right 
kind of people than in any other line of busi- 
ness; however, doctors of medicine who have 
not secured a practice, lawyers without briefs, 
ministers without charges and business men 
who have been unsuccessful in other oper- 
ations are not more apt to be successful at 
mining than they have been in their previous 
callings ; and however honest they may be it is 
not honesty alone, but profits for the use of 
money which the investor wants. The most 
important part of the investigation to an in- 
vestor is the investigation of the people to 
whom his money is to be intrusted, because if 
the people are reliable and successful one can 
be pretty safe in taking a chance with them; 
and if they are of doubtful record or if they 
have not been successful one had best let the 
proposition go and look for something better. 

In making the investigation of people one 
can proceed with some assurance that the in- 
formation can be promptly and accurately ob- 
tained. 

If a person has money to invest it is 
natural that he should have a bank account, 
and his first step in making an investigation 
should be a request to his bank to write the 
bank nearest the place where the mine is situ- 
ated and ascertain what the local credit and 



AND HOW TO JUDGE THEM 97 

standing may be for the enterprise under con- 
sideration. This will give him an idea of the 
credit of the parties, and the property. The 
opinions which may be given by the bank offi- 
cers as to the advisability of investing in the 
mine are of little value, for bank officers know 
nothing of mining, and have persuaded many 
people to turn away from mining propositions, 
which have made fortunes for others who had 
assumed the risk. Mining is a risk and a 
speculation, and as such has no part in bank- 
ing ; the bank officers deal in loans, and credits, 
and are supposed to know the standing of 
people and enterprises in the communities 
about them ; a letter from one bank to another 
making inquiries is pretty sure to be promptly 
and accurately answered, and the investor will 
learn that the proposition he is considering is 
of good, fair, indifferent or questionable local 
reputation; and can to that extent ascertain 
whether the managers are to be trusted with 
his money. 

Let him next take the names of all the offi- 
cers, including the directors of the enterprise, 
and in the same way have his bank write local 
banks where these people may reside, and find 
out what their local reputation may be worth. 

Next he should ascertain which one, or more, 
among the officers represent the active pro- 



98 



MINING INVESTMENTS 



moting interest in the enterprise. Let him 
then take these names and the name of the 
company, and get a commercial credit report 
on them from some one of the great rating 
agencies, asking for information in regard to 
both the people and the enterprise; this will 
give their general credit and reputation; but 
the mercantile rating agencies are often mis- 
taken, most grievously mistaken, and many 
worthy people suffer because of statements 
which they make. Two instances will illus- 
trate. I have certain knowledge of an inquiry 
which was made of a very prominent mer- 
cantile rating agency. The report stated that 
the parties were unknown, had no credit and 
no commercial standing. The people were not 
rich but they were prospering in a small way, 
and were so honest and reliable that one might 
intrust them with anything he had. In an- 
other instance the same agency reported forty 
thousand dollars assets, a flourishing cash 
business and nothing known against the repu- 
tation for a man who, at the time the report 
was made, was a confirmed drunkard, paying 
no one where he could get out of it and with 
a personal standing which was almost disrepu- 
table. These instances show that the mercan- 
tile rating agencies are not always reliable, but 
while they make mistakes at times, their in- 



AND HOW TO JUDGE THEM 99 

formation is always to be sought, and in the 
great majority of cases is accurate and valu- 
able; but one cannot rely on the rating 
agencies entirely, because they would probably 
give a most adverse report against a poor but 
honest miner, who might have a property in 
his control out of which he could make a for- 
tune for himself, and others, if only they would 
intrust a little money to him. 

Having obtained all the information possible 
in regard to the people who are presenting a 
mining enterprise, the next line of inquiry 
should be in regard to the economic geologist, 
metallurgist or mining engineer who had ex- 
amined and reported on the property. He 
recommends it, otherwise the promoters would 
not publish his report. Probably the com- 
pany's officers will supply the record from 
which the investor can make his own inquiries 
— these should be to ascertain what the per- 
son may know, where he attained the infor- 
mation, where and to what extent he has 
studied, what scientific societies have given 
him recognition and what enterprises he has 
served in a capacity similar to the capacity in 
which he is serving the enterprise which seeks 
the investor's money. Inquiries to the scien- 
tific and technical societies with which he may 
be connected, his former employers, and the 



100 MINING INVESTMENTS 

people with whom the gentleman may have 
had relations will show his character, stand- 
ing and abilities ; and give the investor an idea 
as to what his recommendations, and opinions 
may be worth. 

Here certainly is a lot of work recommended 
to the investor who may think of taking a ven- 
ture in a mine, but nothing of success can be 
had without work. One can make a fortune 
through successful mining investments, but 
if one simply wants to take a chance, and will 
invest haphazard through reading an adver- 
tisement, or an unconfirmed prospectus, re- 
turns can be expected only if one is lucky ; and 
when it comes to playing on one's luck it is 
just as well to visit the gambling table and 
have some fun at the game, for money is just 
about as sure to be lost at haphazard mining 
investments as it is at gambling. 



XI 

Conditions Under Which a Mining 
Proposition May be Accepted 

Let us suppose that an investor has decided 
that it is worth while to undertake operations 
in mining stocks, and has made a series of in- 
vestigations, and has the facts from which to 
decide for or against a proposition; and has 
now to debate the situation, to decide whether 
or not he shall risk the money. Naturally the 
conclusion has been reached that there is noth- 
ing in mining which can be considered sure, 
yet the chances of gain are frequently such 
that one should intelligently place a certain 
amount of one's savings, or property, at hazard. 
It is not an investment, it is simply placing 
some money for a great winning in a propo- 
sition where one's intelligence is able to indi- 
cate what the chances of a favorable result 
may be ; and the better chances predominating, 
one is justified in accepting the risk. Where 
conditions are favorable one should have found 
that the investigations confirm the claims 
made in the prospectus; that is, disinterested 

101 



102 MINING INVESTMENTS 

people have written him of the property, par- 
ticularly people living near it, in a great meas- 
ure confirming what has been claimed in the 
prospectus. Probably the reports will not co- 
incide exactly, two different statements never 
are exactly alike, but if the principal features 
have general similarity this is a very strong 
condition in favor of the proposition. 

Through his bank the investor will have 
heard that the general standing of the people 
connected with the enterprise is good, and that 
many people think well of the proposition, par- 
ticularly among those who are in a position to 
come in direct touch with it. The report may 
be that the people are of good local standing, 
but that the bank officers know nothing about 
the mining proposition; such a report can be 
considered as favorable, as the bank can at 
best only tell of local credit, and may be 
greatly misinformed in matters of technical 
valuations. 

The reports on the property under advise- 
ment will be shown on inquiry to have been 
prepared by a man who bears a good reputa- 
tion, and who has the technical skill, and the 
information gained from a good source which 
enables him to write with the authority of one 
who knows his subject. A report from a man 
who has had the technical and scientific train- 



AND HOW TO JUDGE THEM 103 

ing, and who had later had actual and varied 
experience, so that he can speak from technical 
knowledge, and practical experience, is the 
most valuable. When this favorable con- 
dition has been found one can take the report 
and believe it; and if the mine promises well 
the report should be considered to be sufficient 
warrant for an investment. Those who place 
money at hazard pay too little attention to the 
report of a competent engineer and should in- 
sist that such a report be submitted for con- 
sideration before taking any risk in the propo- 
sition. If this were done and the records of 
those who make reports more carefully looked 
up, there would be very little money lost in 
mining. I do not wish to say that a man who 
has not been through a university, but has at- 
tained his knowledge in the School of Hard 
Experience, cannot make a report on a mining 
proposition; frequently the reports from such 
men are the most valuable ; I do say, however, 
that if a man of experience has the ability to 
pass judgment on a mining property, and make 
a report on it which may be accepted with con- 
fidence, that man will have a record to which 
he can refer, and many people will speak well 
of his ability: and if his record does not attest 
the value of his work, then his report should 
not be accepted; and it is my opinion that a 



104 MINING INVESTMENTS 

man who has simply been at mining for a con- 
siderable period is not competent to make a 
report on a mining proposition. It is requisite 
that a man should have been a careful student, 
and should have had opportunities to examine 
many different mining propositions before he 
can report successfully. We are considering 
favorable conditions, and the reports coming 
to the investor will be that the examination of 
the property has been made by a person worthy 
of confidence, both as to his integrity and his 
skill; and this being the case it is fair to put 
the proposition down as a good thing. 

Then the final matter of investigation, the 
questions as to whether the people offering 
the property, or rather who are asking for the 
use of money, are reliable and have the ability 
to obtain results. There is many a good mine 
gone wrong because the management was in- 
capable or dishonest, and the investor should 
here exercise great care in his investigations. 
If the personal credit and standing of the peo- 
ple with whom he is to intrust his money is 
good locally, in the places where they live, 
and if they have a good financial standing, 
are considered good business men and have 
placed some of their own money in the 
enterprise in which he is asked to take a 
risk ; then, if it is shown by the investigations, 






ANU HOW TO JUDGE THEM 105 

that these people know what they are talking 
about, and have been in mining as a business ; 
or, at least, that some of those who are man- 
aging the proposition do know mining and 
have made money at it, then the supposition 
is fair that they will be able to make still more 
money, and they being found both honest and 
capable one may expect to make money with 
them. 

All these considerations being favorable one 
is ready to take the investment, and it is only a 
question of the price which he should pay for 
the stock. It is supposed that the property is 
free from debt and the title held clear for the 
stockholders, unencumbered by liens, con- 
ditions, mortgages or obligations to be per- 
formed; because where these are found a 
strong element exists against the chances for 
success, and if the proposition is accepted with 
such incumbrances the price paid for the stock 
must be much lower than would be paid in a 
free and clear proposition. Still if the other 
conditions are favorable, a good local credit, a 
good report on the property made by a com- 
petent man; and the proposition being in the 
hands of honest, capable and experienced peo- 
ple, it certainly is favorable to take a chance 
with them, and the only question to consider 
is that of price. The investor will have made 



106 MINING INVESTMENTS 

a calculation of the present worth, that is the 
actual value of the property for cash, and will 
have compared it with the prices asked for 
similar property. He will have seen how the 
present condition of the proposition compares 
with the former conditions of other com- 
panies when they were being promoted, and 
he will have decided whether the price asked 
far the shares beyond the actual cash, or pres- 
ent worth value of the property, is too much 
to pay for the prospective values, and the ex- 
pectations. This difference is to be put into 
work in the property, and will improve its 
value, naturally so; and the proposition being 
in honest, capable hands, with experienced peo- 
ple as managers, the expectation is reasonable 
that it will be well expended, and that the in- 
vestor will obtain the benefit. But how much 
is he to make? That the money he is placing 
will benefit the property is plain enough, but 
if it benefits it only to such an extent that the 
investor simply has the value of his money, 
then there is no profit, and one goes into min- 
ing for profits. To double one's money should 
be very ordinary, to make five hundred or even 
a thousand per cent, on mining risks carefully 
considered should not be rare. If it is found 
by the investor that the expenditure of his 
money on the property is probably to im- 



AND HOW TO JUDGE THEM 10? 

prove it so that he will obtain at least an indi- 
cated profit of one hundred per cent, with proba- 
bilities that it will be even more, then the 
proposition is a fair one, and he can put his 
money in against the work which has been 
done in acquiring the property, and the chances 
are decidedly in his favor. Naturally it is so, 
for if the proposition is found to have a good 
local credit; to have been reported on favor- 
ably by a competent, experienced man; to be 
in the hands of honorable, capable, experi- 
enced and trustworthy people, who under- 
stand the business; and if the price asked is 
one which admits of large profits then, where 
is the risk? In truth there isn't any, but the 
price of selecting such a good investment is 
that one should take the time and trouble to 
make the investigations. The reward will be 
a share of the great wealth made in mining, 
because the investor will, if he exercises cau- 
tion and good judgment, be certain to obtain a 
share in good propositions. One must do the 
work of making the investigations, however, 
and accept only facts, not hearsay evidence, in 
coming to a decision. 

Accepting evidence which is not well au- 
thenticated causes many losses. To give a 
neighbor a good word of encouragement is 
natural even in the case of a mining proposi- 



108 MINING INVESTMENTS 

tion. It is well to be kindly but money is a 
precious thing, grievous to lose and financial 
recommendations should be given with cau- 
tion. Many people speak without due con- 
sideration and it behooves an investor to con- 
sider those who recommend as well as the 
enterprise recommended. Boards of trade and 
merchants may be interested in anticipated 
sales, prominent politicians must speak a good 
word for all their constituents, clergymen 
are naturally friendly and neighbors are usu- 
ally neighborly. Such services may or may 
not be reliable. Especially undesirable are the 
so-called financial journals usually edited by 
irresponsible people, or by people of bad rec- 
ord, who for a small sum annually offer a 
semi-insurance against loss through the corre- 
spondence bureaus. Such journals are known 
by the character of their reading matter — edi- 
torials against dishonesty and violent personal 
attacks on individuals or enterprises. Desirable 
sources of information are reputable publica- 
tions where character and worth are indicated 
by the dignity of their pages and their freedom 
from personal abuse; so are credit agencies, 
mining engineers and geologists of known 
reputation, banks, bankers and in some cases 
lawyers. It is best to have information from 
such sources as these even if the investor has 
to pay a moderate fee in order to obtain it. 



XII 

Conditions Under Which a Mining 
Proposition Should be Rejected 

One can reject a mining proposition in short 
order, and one short chapter is sufficient to in- 
dicate conditions, any of which should be war- 
rant enough for declining to take an interest 
in such a proposition. The investorwouldprob- 
ably find a means for making inquiries through 
his bank as recommended, and would first 
learn of the local standing of the proposition, 
and the men connected with it. If word comes 
back that the proposition has a bad, or ques- 
tionable reputation, and the people connected 
with it are not held in respect among their 
neighbors, it will be very safe to let the mat- 
ter entirely alone, and refuse to invest at any 
price, no matter what inducements may be 
offered. 

Another condition which would be sufficient 
to warrant one in declining absolutely to have 
anything to do with an enterprise is, where the 
prospectus, and published reports, do not agree 
with other accounts of the property which may 

109 



110 MINING INVESTMENTS 

be had from parties living near it. Of course 
no two accounts will agree exactly, but if there 
is a decided discrepancy, and the reports 
offered by the parties interested in the pro- 
motion are very much better than any one 
else will be willing to say for the property, ex- 
aggerated and misleading statements can be 
suspected, and the trustworthiness of the 
whole proposition placed in doubt, and one had 
better be careful and have nothing to do with it* 

If it is found on investigation that the prop- 
erty is not free and clear, but is incumbered 
with debts, liens and contingent clauses affect- 
ing the title; conditions which have not been 
clearly stated in the prospectus, then fraud 
may be suspected, and certainly one would not 
want such an investment. 

If it is found on receiving the reports from 
the mercantile agencies that the people offer- 
ing the stock have been connected with ques- 
tionable enterprises, or are not of good busi- 
ness reputation, then the danger flag has been 
found and should deter any one from making 
an investment. 

The other conditions under which a propo- 
sition should be rejected are not so clear and 
will very much depend on the personal opin- 
ion of the investor. He must form his own 
judgment as to the condition of the property 



AND HOW TO JUDGE THEM 111 

when he is asked to invest, and how it com- 
pares with the conditions which were found to 
have been reported in regard to mines which 
have turned out well, but which were, of 
course, once in their prospect stages of de- 
velopment. Here one must exercise judgment, 
and must read the accounts and reports of 
mines which have turned out well, and judge 
what the prospect may be for the mine in 
which he may be asked to invest. In this the 
investor must rely very much on others, and 
must look up the record of the man who makes 
the reports recommending the property. If it 
is found that he has reported on properties 
which have aimed out badly, after he had 
recommended them; if it is found that he is a 
man of questionable reputation; if it is found 
that he is not a disinterested party, but owns 
part or all of the property he recommends, and 
his recommendation is not confirmed by others ; 
and if it is found that he had not had the ad- 
vantages of special training, or wide experi- 
ence in mining property, it will be safer not 
to risk money in the venture; especially if the 
proposition is one where ore is not much in 
evidence but it is hoped and expected that min-^ 
ing operations will open up mineral deposits 
which will be valuable. 

Most mines are failures because a mistake 



112 MINING INVESTMENTS 

has been made, or expectations have not been 
realized in regard to the supplies of ore; and 
unless the proposition makes a very good 
showing and has been reported on favorably 
by qualified men the chances of losing are 
much greater than are the chances of making 
a profit. 

All mines go through a struggle to find ma- 
chinery which will treat the ores successfully, 
and often years are occupied and hundreds of 
thousands of dollars expended before a suit- 
able plant can be constructed, and profits 
made; this period of disappointment during 
the development must be expected and is not a 
reason for turning away from the enterprise. 
If, however, the investor finds that tendency 
of the management is to hurry the equipment 
before they have opened the property, and 
know how much ore they have available, it is 
well to remember that undue haste leads to 
disaster in mining. As most mining propo- 
sitions are failures, one must remember and 
study the circumstances which have brought 
about these failures, and form his judgment as 
to whether the risk shall be accepted or re- 
jected. Of the propositions offered, certainly 
the great majority are to be rejected. Of course 
one wants nothing to do with enterprises which 
are simply to sell stock and one can detect 



AND HOW TO JUDGE THEM 113 

these as noted in a previous chapter, and natu- 
rally will let them alone ; still this may not be 
an important part of the investigation, because 
a scheme to sell stock in a property not worthy 
of the investment will only be proposed by 
dishonest people, and the bank reports, with 
commercial agency statements, will give the 
necessary information and enable one to avoid 
dishonest propositions. 

Then, finally, the question as to the price 
asked for the shares must be considered. The 
best mine in the world might be undesirable 
if the price placed on the shares were one 
which would not give a fair mining profit to 
the investor, and a mining profit is a very large 
profit; such shares should not be purchased. 
These are usually put in the public markets, 
and the prices advanced up, and up, to attract 
buyers; but the investor should consider only 
values and multiply the number of shares in 
the whole mining company by the price quoted 
per share, and then consider whether the mine 
is worth that much, and if the price seems ex- 
cessive let the proposition alone. 

Similarly, having deducted the estimated 
present worth, or real salable values from the 
shares, as per the formula previously stated, and 
having found the difference which is the price 
asked for the prospective values ; and if this is 



114 MINING INVESTMENTS 

found to be more than the situation warrants, 
or is greater than the rate generally quoted 
for other mining properties, it is better not to 
take the proposition, because where one pays 
too much one is not likely to obtain a due 
profit. 

As to investing in companies managed by 
doctors of medicine, ministers and others, 
usually it is best not to do so, but there are 
often exceptions, especially where the manager 
has been shrewd enough to surround himself 
with competent, reliable men. 

Finally, where anything looks doubtful and 
the statements are not clear, and businesslike, 
and the managers take offense and object to a 
careful investigation when it is proposed; it 
is better not to go into the deal with them, 
because most mines are failures anyway and 
it is only by selecting the very best that one 
can expect to make money. 

In these chapters nothing is said about divi- 
dend paying mines, because one is not solicited 
to invest in such property. Established com- 
panies rarely issue a prospectus, and the specu- 
lative, the big profits in mining are made by 
getting in on the new propositions which are 
desirable but cheap because in their initial 
stages of development. 

The two propositions — investment in estab- 



AND HOW TO JUDGE THEM 115 

lished mines and investment in new specula- 
tions — are so different that they must be 
treated separately. 

Before considering dividend paying mining 
stocks and their special features, it would be 
perhaps fitting to state in this chapter that in 
one respect such property must be considered 
on exactly the same basis as the non dividend 
paying stocks. The influence of a management 
endeavoring to take advantage of their inside 
information to benefit themselves may be 
equally disastrous to those who invest, both 
in dividend and non dividend paying stocks, 
with the greater risk that in the case of divi- 
dend paying stocks the price is always higher 
and more money is usually at stake. There is 
no reason why a dividend paying stock should 
not be as carefully scrutinized in regard to the 
management as a non dividend paying stock, 
and where men are found who are not trust- 
worthy, it is best to let them keep the stocks 
for themselves, no matter how attractive they 
may make the market in developing activity 
of speculation. Examples of disastrous results 
for dividend paying mining stocks are not 
wanting. Almost every year some such case 
is developed. Not so long ago a well-known 
copper stock was selling well toward the one 
hundred dollar per share quotation. The man- 



116 MINING INVESTMENTS 

agement was brilliant but speculative in its 
own interest, and to-day the stock is selling at 
but little more than a dollar per share, to the 
great loss and injury of those who bought at 
the high prices. A silver stock was made popu- 
lar in the public market, and sold well up into 
dollars per share under speculative manipula- 
tion. Now it is down to a few cents a share, 
and has a poor standing even among the non 
dividend paying stocks. 

Brokers are wrong when they advise their 
customers that if they buy dividend paying 
mining stocks enjoying a public market the 
risks of mining will be eliminated. Dividend 
paying mining stocks are good if they are cheap 
enough, but usually they sell for more than 
they are worth, and no matter what the price 
they are subject to the same dangers in the 
management as non dividend paying stocks, 
and should be scrutinized with the same care. 






XIII 

Investments in Dividend Paying Mining 
Stocks 

When one considers an investment in divi- 
dend-paying mining stocks it is usually all a 
question of price ; not entirely so, however, be- 
cause it sometimes happens that widely adver- 
tised offerings of dividend-paying mining 
stocks turn out to be the worst kind of 
swindles; the dividend, so called, being simply 
repayments of a small proportion of the money 
received from the sale of stock. This is a thor- 
oughly dishonest practice and one distinctly 
forbidden by the law; it is done, however, and 
there are many subterfuges to hide the real 
character of the payment. A common form is 
for the promoters to make transactions among 
themselves which will show a paper profit and 
then declare a dividend, but in reality pay it 
only to a portion of the stock, that is to a few 
shares which they may have sold; the amount 
required is not large, because only a few shares 
have been disposed of and the stock which they 
hold really receives no dividend, the promoters 

117 



118 MINING INVESTMENTS 

sign a receipt for it, and to all appearance it has 
been paid. On the strength of this dividend 
the stock becomes salable, and presently when 
the promoters have sold what they consider 
sufficient, the stock is left to shift for itself and 
no more dividends are paid. Under one form 
or another, with better or more crude conceal- 
ment and manipulation, this game is being fre- 
quently worked, and many are defrauded by it. 
The means by which an investor can protect 
himself are very simple. If a property is really 
earning dividends active operations must be in 
progress at the mines, and accounts of sales of 
ore will be in evidence ; or returns from bullion, 
metal or mineral sales will be at hand and there 
will be some system of bookkeeping. A com- 
pany honestly managed should make no ob- 
jection to submitting proofs that its dividends 
are really earned, and where objection is made 
one can refrain from investing. The same care 
should be taken in looking up the standing of 
officers and of the enterprise itself, as would be 
taken if it were an untried speculative venture ; 
and where it is found that the enterprise is in 
the hands of questionable people it should be 
let alone, no matter how much may be paid in 
dividends, no matter how active the stock may 
be in the public markets; such activity is no 
criterion of real conditions, and may be entirely 



AND HOW TO JUDGE THEM 119 

the outcome of clever manipulations on the 
part of the promoters. There is just one thing 
for an investor to do in relation to a propo- 
sition found in the hands of people of question- 
able reputation, and that is, let it alone. 

When it is found, however, that a property 
is really in operation, and is earning dividends, 
then it may be a very attractive proposition 
for an investment, but it is all in the price. A 
mining stock should pay a high rate of dividend, 
because if an investor does not get his money 
back, and a profit out of the dividends, the in- 
vestment is a loss to him. The reason is that 
all mines must come to an end some time, even 
the greatest, and when the end has been 
reached, and all the ere taken out, the mine is 
worthless. The question is, how long can the 
mine keep on paying dividends, and how far 
away is the period when it will be worked out 
and worthless? The world is full of worked 
out mines, and as all must come to an end the 
investor should consider the end, not the pres- 
ent of a mining investment. 

If a stock is bought at a price which will 
net the investor twenty per cent, a year in divi- 
dends, the rate would certainly look attractive. 
But the rate of dividend alone is not sufficient 
to warrant an investment, one must be reason- 
ably sure that the mine contains mineral 



120 MINING INVESTMENTS 

enough to keep the dividend payments going 
for a period sufficiently long to return the 
money invested and yield a profit. At twenty 
per cent, per annum one's money will be re- 
turned in five years, at ten per cent, per an- 
num one's money will be returned in ten years, 
and at five per cent, per annum the money will 
have to remain out for twenty years before 
there is any profit, and only a few mines have 
paid for so long a period. 

It seems reasonable that a stock in an ordi- 
nary mine paying a net return of only five per 
cent, is selling too high, but that when the rate 
is between ten per cent, and twenty per cent, 
the proposition is more attractive, and more 
nearly on a normal basis of compensation for 
the risk involved. 

Dividend-paying stocks are usually not 
offered for public subscription, and most of 
them have regular quotations in the /stock 
markets at which an investor can either buy 
or sell, and with such stocks the opportunities 
for speculation are very attractive. The mar- 
kets for such shares are rarely very broad, and 
they are for this reason extremely sensitive to 
changes of market conditions, and their fluctu- 
ations are frequently in a wide range. In 
making speculative purchases of mining stocks 
in the open markets one should be governed, 



AND HOW TO JUDGE THEM 121 

not by the fluctuations, so much as by the esti- 
mate he may have placed on the actual worth 
of the property. If one will do the work, and 
make the investigations which will give the 
true conditions at the properties he may think 
worthy of attention, and then having obtained 
the facts compare the prices for the shares 
with the average prices of similar propositions, 
and having determined the worth, the investor 
is in a position to buy whenever the prices are 
below the worth which he may have estimated, 
and sell when the price is greater than the 
worth, but always it must be remembered that 
to put money in any mining proposition where 
the management is not thoroughly reliable and 
capable is to place it at a double risk, where 
the odds are too much against the investor. 

Where a speculation develops in a mining 
stock, and it begins to assume activity, and 
move up to better levels day by day, one can 
suspect manipulation; such has been seen re- 
cently in several stocks, and one should pay no 
attention to it. By all the signs some one is 
out to unload stock on careless investors, and 
presently those who have engineered the 
manipulation will withdraw from the market, 
and go about with a broad smile, and sneer for 
the credulous, telling how they have made a 
killing. It is the same old story of the faker 



122 MINING INVESTMENTS 

at a country fair selling watches, only in a dif- 
ferent form. The faker offered watches at 50 
cents each, saying that the next day he would 
sell the same watches for a dollar and take 
back any he had sold for fifty cents at the price 
of the day, one dollar. The next day the 
watches were offered for a dollar, and anyone 
who had bought at fifty cents could get a dollar 
for his watch. The business being completed 
the faker then offered watches, as many as 
people wanted, at one dollar each, saying that 
next day he would sell at two dollars and take 
back watches at the same rate. This he did 
and then announced that next day he would 
sell at four dollars and pay four dollars for any 
watches he had sold, and people bought freely 
at two dollars. When the next day came the 
faker kept his word, took back the watches 
at four dollars, and then announced that he 
would sell as many as people wanted to buy at 
four dollars, and if they were not satisfied, 
take them back at his selling price for the next 
day, which would be eight dollars. He as- 
sured the people that his only object was to 
advertise the watches, the manufacturers 
knowing that on account of the superior qual- 
ity of the watches they would by this simple 
means of making the people handle them, and 
see their merits, secure the good will of the 



AND HOW TO JUDGE THEM 123 

neighborhood and a permanent trade. It was 
a plausible story and the people bought in great 
numbers at four dollars each. That night the 
faker packed his grip and went away, leaving 
the people stacked up with dollar watches for 
which they had paid four dollars. The sup- 
port had been withdrawn from the market, just 
as it is in fact, though in a different form, 
withdrawn from the stock market when the 
manipulator has sold out at a price satisfactory 
to himself, after spreading the report that he 
would presently be selling at a higher price, 
and would take back any stock which might be 
offered at the higher figure. In one form or an- 
other this game is constantly being played in 
the open stock market, often so cleverly ad- 
justed and concealed that the manipulation 
looks even to the best informed like a real de- 
velopment of values, but the result is always 
the same, the manipulators finally obtain a kill- 
ing, and having secured a large price leave the 
purchasers to their fate, and the market be- 
comes unsteady, flounders to lower quotations, 
in some cases goes out of sight altogether, 
and the stocks become unsalable. 

In mining stock operations there is just one 
thing to study and that is actual values ; on any 
other basis than buying when the prices are 
depressed below actual values, and selling 



124 MINING INVESTMENTS 

when they advance above them, one will cer- 
tainly be left in the lurch. The skill is in de- 
termining what the actual values are, and to 
do this one must make a careful study of all 
the information available. 

In considering such information the investor 
must not be misled by preferred mining stocks. 
A preference for a limited interest to a small 
number of shares, with a similar interest to a 
large number of common shares after which 
both kinds are to share alike simply means 
that the bulk of the product will go to the 
common stock. The preferred may have its 
interest but cannot have a profit till large pay- 
ments have been made to the common stock, 
and unless the preferred has full preference 
and then shares equally in all earnings with 
the common stock the word preferred is a 
misnomer and fraud would be a better word 
to designate its position. 



XIV 

The Spirit of Adventure and Specula- 
tion. What Some Have Gained 
and What Others Have Lost 

Luxurious in the metropolis lives a man 
with everything his whim or fancy can desire, 
if only the purchasing power of money can ob- 
tain it. Riches are his, gained from the mines, 
and fair fortune smiles upon his happy life. 
On the western plains is a human skull, 
bleached, and white in the sun; ghastly in the 
pale light of the moon; a toad has made his 
refuge in it secure in the silence of the desert, 
and it is nothing; the man lost his all, and his 
life was a sacrifice to fortune, he sought for 
mines and had no reward. These are the ex- 
tremes, the prize to one, the penalty to the 
other. Who goes a searching after mines? 
The spirit of adventure and speculation stirs 
always in the human soul, desire, triumph and 
achievement ; or desire, hardships and failure — 
perhaps death ; one is the penalty, the other the 
reward. Is it worth while? Perhaps, at any 

125 



126 MINING INVESTMENTS 

rate men will always take the risk, that is some 
men; and when an excited prospector presents 
himself before those who might take a chance 
with him in the property he has found, or 
thinks he has found, is it a great thing that 
one should risk a little money to test a prop- 
erty, which may have been obtained after years 
of hardship, exposure and danger. My belief 
is that where a miner who has done honest 
work, has really searched and prospected, and 
can show a record which would entitle him to 
confidence, and presents himself to people with 
capital, saying that at last he has found a 
prize, then his story should have ready listen- 
ers, and it ought not to be so hard for him to 
secure the money to prove up what he has 
found. To take a chance at first hands with 
those who prospect for mines is a most at- 
tractive form of speculation, that is, where the 
prospector has succeeded in finding something 
which promises to develop values. To grub 
stake a prospector, meaning to give him the 
supplies which will permit of explorations to 
find mineral deposits, is playing simply on a 
chance, and may or may not be good business ; 
but where the prospector has found a mine it 
is a very different proposition, and one might 
well take the risk. 

To tell of great individual fortunes which 



AND HOW TO JUDGE THEM 127 

have been made at mining is not of interest to 
our subject, we are treating of that which an 
investor could do and what he should do in 
the spirit of adventure and speculation, to risk 
a little for gains in volume. Only one must 
risk with judgment, but a risk one must take 
if one would share in the hidden wealth of 
mining regions. 

In considering what some have gained, the 
copper deposits of Michigan may have a promi- 
nent place in one's thoughts, for there are the 
accounts of how hunters and adventurers, 
years ago, brought back stories of great ex- 
posure of pure copper; some said mountains 
of pure metal exposed in the forest lands of 
the little known northern peninsula of Michi- 
gan. Occasionally people gave heed to these 
stories, most held them in derision, but those 
who gave heed sent and secured the properties. 
Then came the struggle to obtain funds and 
it is said that stock in the great Calumet and 
Hecla mine went begging for purchasers at but 
a fraction of its par. It was a struggle of some 
years, but in the end those who had ventured 
were triumphant; and rumor, on well founded 
information, has it, that some of those who 
were first to take the risk have had a compe- 
tence for themselves and for their children out 
of small amounts invested in Michigan. Surely 



128 MINING INVESTMENTS 

a good compensation for the risk. Not only 
the Calumet and Hecla but other great mines 
were developed. Then when some had secured 
the prizes a speculation developed; great was 
Michigan, copper was reported to be every- 
where, and copper companies, exploration 
syndicates and mining enterprises sprang up 
in numbers; people bought, and speculation 
ran a turbulent course ; but the cream had been 
secured, most of the latter propositions had no 
value and they who went a trailing after where 
others had been first, lost money, and some 
were ruined. 

This is a condition which should be empha- 
sized in one's thoughts; the money is in the 
new discoveries, the big money; the rare re- 
turns which give a competency for a small in- 
vestment put at risk. Always it has transpired 
that where a great discovery is made a swarm 
of speculative enterprises follow after, the pro- 
moters stating that their mines are just adjoin- 
ing, or just in line with, some well known im- 
portant proposition and mining discovery. 
Wherever there is a great mine the country 
all about it will show indications of mineral; 
these in most instances do not lead to new 
mines, but simply point to the great mine 
which has been discovered. The district natu- 
rally has fame because some two or three, per- 



AND HOW TO JUDGE THEM 129 

haps more, mining companies have occupied it 
and are making great strides at uncovering 
rich ores; the press is filled with accounts of 
their great doings, the well advertised situation 
is such that any property in the famous dis- 
trict can find purchasers for shares; the mines 
offered are just next to, or near the great dis- 
coveries, what an opportunity! Thousands of 
late comers purchase, and lose their money. 
There is little use in trailing after a great dis- 
covery, better get in on the great discovery it- 
self, even at an excessive price, than to risk 
money on cheap trailers; but the conservative 
thing to do is to recognize that the discovery 
has been made and that others have it; then 
keep on the watch for announcements of new 
fields, and when such are first brought forward 
be quick to investigate, and if the outlook 
promises well, and is in honest hands, be 
among those who get in first. 

This condition of profit to the first comers 
and losses for all who follow after is illustrated 
in so many places that one can consider it a 
fact almost beyond dispute that profits are only 
for the early comers, generally speaking, of 
course, but in most cases it is a fact; and, 
naturally, those who get in first obtain the pick 
of anything the district may afford. In this 
there are many illustrations. A great excite- 



130 MINING INVESTMENTS 

ment was developed when gold was given 
prominence in California, and millions upon 
millions were made by those who had the first 
propositions in the different mining districts; 
and since then millions upon millions have been 
lost by others following where the first suc- 
cesses had been made. California is a great 
state and new mining districts will probably 
be discovered and then the history will be re- 
peated; good luck to those who get in first. 

Later came the discoveries of oil in Pennsyl- 
vania with millions made, and then millions 
lost by late investors. 

Then came the southern coal and iron lands 
with the same results, the iron discoveries in 
Michigan, the mining regions of Colorado, the 
copper zone in Montana, the great copper belt 
in Arizona and New Mexico, the excitement 
following the discovery of gold in Alaska, and 
the lives of thousands lost in trailing after 
those who had the prizes. Today we are having 
the splendid developments in Nevada, where 
some few great mines have made, and are 
making fortunes for the possessors, while hun- 
dreds of trailers are yapping out their wares 
and millions are being lost in expectations 
based on a supposition that mineral forma- 
tions are of such great extent that all the nu- 
merous companies must have valuable propo- 






AND HOW TO JUDGE THEM 131 

sitions. The same situation has developed in 
Canada, and will probably develop in re- 
lation to Mexican mines where some remark- 
able developments are taking place. History 
will repeat itself, a few great mines will be 
found to have enormous value, and those who 
have invested in the second rate propositions 
will find their ventures resulting in a series of 
grievous losses. 

Whatever the spirit of adventure and specu- 
lation may move one to attempt, one should re- 
member that those who have made money in 
any district have been in on the main ledge, 
the principal deposits, and that is the place 
where one should have investments if one ex- 
pects to make money in mining. 

The question naturally follows: what is the 
main ledge, and how shall it be known? So 
far as speculation is concerned the stock rep- 
resenting the main ledge is usually the leader 
but at times the allurements of the market 
leaders, manipulated to high prices, may bring 
serious disaster to the confiding purchaser. 
The advice to get in on the main ledge should 
be modified by the admonition — do it at the 
right time — and the right time is when the 
stock is still low and while there is some- 
thing yet to be developed. Usually it will be 
found that the principal ore zones of a region 



132 MINING INVESTMENTS 

have definite characteristics with a trend of 
formation, and a succession of limitations in 
an irregular, but pronounced sequence. The 
blanks just near to, just in line with or as 
apparent extensions of ore bodies rarely 
develop anything but disaster. 

It should be remembered that when a 
new mining region is discovered, the whole, 
or the choicest portions can be obtained by 
making the locations. Those who know 
enough to discover a mining region usually 
know enough to locate the main ledges; and 
a big mine can be located in a surprisingly 
small amount of ground. It is the approxi- 
mations that spread out all over the region. 
As an illustration remember how much money 
could have been made by purchases of the 
Nevadas, the Cobalts and other new mining 
stocks when they first appeared, and the 
newspapers were calling them fakes; then 
remember how much money was lost buying 
on the boom, when all the newspapers were 
telling of wonders and riches, which they 
knew nothing about, as events have demon- 
strated. Get in on the main ledges but get 
in at the right time, and beware of a boom, 
then it is time to sell, not to buy. 



XV 

The Prospector and His Agent, Honest 
and Dishonest Work Compared 

Will he secure the benefits of his discovery? 
So many have located mines and then lost them 
through dishonest agents, that naturally the 
prospector is suspicious. Here is a point which 
one can consider when a mining venture is 
under advisement: If the agent in charge of 
the negotiations is a man who has the confi- 
dence of the miners and prospectors he is 
pretty certainly a man who can be trusted by 
anybody. 

This chapter is to tell not so much of the 
relations of investors and agents, as to show 
how all the losses in mining do not fall on those 
who supply the money for operations. 

The mine agent or broker is always 
scheming, honestly or dishonestly; he has a 
purpose to accomplish, he seeks to obtain con- 
trol of a mine which has been discovered, and 
so manipulates the arrangements for incorpo- 
ration that he may benefit in a share of the 

133 



134 MINING INVESTMENTS 

property, and at the same time put it in a po- 
sition from which capital can be obtained for 
its operation. When this is honestly done any 
profit which the agent or promoter may obtain 
is well deserved; but where the work is not 
fairly rendered, where the control of the prop- 
erty is secured by questionable representation, 
and promises which the promoter cannot ful- 
fill, then the shares obtained are illy gotten; 
but unfortunately the laws are such that it is 
as difficult to punish such transgressions as it 
is to obtain judgment against one who has sold 
and misrepresented shares. In some instances 
a clear case is shown, but most frequently the 
undertakings turn out to be only that due 
effort should be made, and a positive engage- 
ment is not found ; and by due effort anything 
may be intended; so the case is hard to reach, 
and the prospector who has found a mine must 
be careful. Unfortunately, watchfulness, in- 
telligently exercised, is as rare among those 
who have found mines, as caution and serious 
effort at investigation is rare among those who 
invest in mining shares, and the promoters are 
the principal causes of all the difficulties. 

Our prospector having secured his papers, 
and having finished enough work on his claims 
to hold them for a year, must look for larger 
capital to put them on a strong working basis. 



AND HOW TO JUDGE THEM 135 

He does not have to look far to obtain agents ; 
the fame of his discovery has gone abroad and 
he is fortunate in being able to pick and 
choose. Having found a satisfactory man, a 
clear contract is drawn, the rights of the pros- 
pector in the share of the mine which he will 
keep for himself, the share he will allow for 
the capital, and the percentage he is willing 
to pay the agent, are all clearly designated ; the 
titles are then deposited to protect the transac- 
tion, and after that a company is formed, and 
generally good results are obtained, not only 
for the prospector, but for those who purchase 
shares ; and under careful just management an- 
other is added to the long list of brilliant and 
successful mining enterprises. 

It is very pleasant to find such instances, but 
unfortunately all are not so, and many a pro- 
moter is responsible for ruin and loss where 
better results might have been obtained. Not 
all prospectors are so successful as to find a 
mine which is great enough to command at- 
tention. There are many properties, and min- 
eral deposits ; and oftentimes the owners must 
make all sacrifices to obtain the necessary 
funds, but there is such doubt attached to a 
prospector's story that often years pass before 
a man who has discovered a mine can obtain a 
hearing, and naturally the mine agent can 



136 MINING INVESTMENTS 

make his own terms ; if only he will render the 
services, he can have the mine on deferred 
payments, that is, stake the mine and control 
it for purposes of organization and promotion, 
paying himself after the work is done. 

Usually a man who has discovered a mine 
can in a little while find someone to undertake 
its promotion, and then, if the agent is not 
strictly honest, the contracts and agreements 
are so drawn that the owner is completely 
under the control of his agent. Usually the 
first step is to make an agreement stating on 
what terms the agent may control the prop- 
erty. Frequently the time limit is made as 
extended as the mine owner will allow, and 
the promoter goes to work or perhaps only 
appears to go to work to obtain subscriptions 
for the proposition. At any rate the expected 
contributions to the working fund are not ob- 
tained, but men are introduced who urge that 
if the mine were put in a company, then stock 
could be sold and money obtained, so after a 
time a company is formed and the property is 
transferred to it for shares, some of the shares 
are voted to the treasury, and a goodly pro- 
portion to the promoters, who now take more 
interest in the property, naturally, because they 
own a large share in it. Some money is ob- 
tained through the sale of shares, most of it 



AND HOW TO JUDGE THEM 137 

going to the promoters who sell their own 
stock. It is theirs, what law can prevent them 
from selling it? Some money is used on the 
property, enough to perhaps demonstrate to 
the promoters that it is a good thing, and then 
the whole proposition drags, money cannot be 
raised ; the prospector must live, and presently 
he wants to sell some shares. Impossible, 
there is no market, the promoters have been 
unable to even sell the treasury stock. To re- 
mind them of their promises is of little use, 
what they said was what they expected to 
achieve, but for one reason or another con- 
ditions have not been favorable; after a time 
when the situation improves they will be able 
to carry out the arrangements; but the pros- 
pector wants money, so he finally sells a large 
block of his shares for a trifling price, and 
when he wants more money sells again; and 
presently all his stock is gone, and the mine he 
discovered is no longer his. Then he goes 
back to the mines cursing the promoters, 
damning corporations and swearing that stock- 
holders are a set of sharks and thieves; but it 
is the promoters who have bought his shares 
for almost nothing, and now that they own all 
the property, or rather have it all under their 
control, with the majority owned by them and 
a good balance of stock in the treasury, they sro 



138 MINING INVESTMENTS 

to work and develop the property, obtaining 
money by selling the shares; and most likely 
let the property fail two or three times, and 
by foreclosure or bankruptcy proceedings buy 
it in, and sell the shares of reorganized com- 
panies, repeating the operation, till finally the 
mine is on a working basis ; and they who ob- 
tained the property from the discoverer, at 
forced sale, and by manipulation, and who have 
obtained money from several sets of stock- 
holders to bring it to development, reap the 
benefit of their conspiracies, and own a fully 
developed mine. 

The question may be asked why does the 
prospector have to do as the promoters or 
agents desire? Why does he not sell his shares 
directly to the investors? He cannot do so — 
investors will rarely listen to the man who 
owns the property and buy shares of him ; and 
then he does not know how to organize, and 
naturally he seeks the promoter; and if pro- 
moters who may not be honest have obtained 
a hold on his property he must sell through 
them or not at all, for who would buy stock 
if those who have organized the company ex- 
press doubts and rather talk against the propo- 
sition, and criticise the discoverer? 



XVI 

The Prospector, the Promoter, the Ban- 
ker and the Investor, Correct and 
Dishonest Work Compared 

Three against one is not a fair combination, 
yet the prospector, the promoter and the 
banker are frequently an adverse combination 
against the investor in mining stocks; and 
when the combination is formed for dishonest 
purposes the investor has a poorer chance be- 
cause usually he trusts the banker. Probably 
the bankers are more to blame for losses in 
mining than are any other people. They are 
to blame, it is claimed by some people, for two 
reasons; it occasionally happens that they 
enter into unlawful combinations with the pro- 
moters to sell questionable shares to unsus- 
pecting investors; and the other reason why 
the bankers frequently cause loss is that they 
will sneeringly dismiss the subject when a 
client asks advice in reference to a mining ven- 
ture. The banker fails to obtain for himself 
participation in one of the greatest, if not the 

139 



140 MINING INVESTMENTS 

greatest of our industries, and leaves his client 
without means of information, and an easy 
prey for the unscrupulous promoter. In regard 
to railway stocks, industrial stocks, municipal 
and corporate bonds the banker is well in- 
formed and seeks constantly to obtain infor- 
mation. In regard to mining he is densely 
ignorant, nor tries to better his information. 
The banker, occupying as he does a public 
position, neglects his duty when he makes no 
effort to serve intelligently such of the clients 
of his house who may become interested in 
mining propositions. He does them a double 
wrong by refusing to recognize in mining a 
great corporate industry because he retards 
their participation in this great industry, and 
by intelligent advice he could make advantage- 
ous investments for the clients of his house, 
where, by leaving to their own resources those 
who otherwise would seek his counsels, the 
way is left open for men who work by methods 
which at best are questionable. 

An inquiry as to how bankers frequently 
take part with promoters will show many inci- 
dents of interest, and in some respects the 
bankers in the great financial centers are as 
gullible as the most innocent small tradesmen 
of a provincial town. 

The promoter knows that to succeed he 



AND HOW TO JUDGE THEM 141 

must approach each victim on his most acces- 
sible side, and usually in dealing with a bank- 
ing financial house he begins by opening an ac- 
count for speculation in listed stocks. It may 
have been decided between the prospectors and 
promoters, that the property they represent 
should be offered in the great financial mar- 
kets; to do this money is required, and fre- 
quently they have money, and after laying 
their plans it will happen some morning that 
a well appearing gentlemanly man calls at a 
New York banking house to make inquiries 
in regard to the stock market. The bankers 
are there for that purpose, and at once become 
interested in the pleasant stranger, and cor- 
dially invite him to call again. Of course, he 
calls again, this time with some money, and 
an account is opened. It proves a good ac- 
count because the new client is there to seek 
favor and keeps his money active, taking small 
profits or losses, making several transactions 
a day and becomes a regular habitue of the 
place. Naturally the talk drifts to mining, and 
presently the bankers become interested in his 
stories ; samples are shown, and the next thing 
a mine is offered through their house backed 
by one of their best customers, a shrewd 
successful man from the west. Then the 
game begins ; the prospector, and others have 



142 MINING INVESTMENTS 

come on from the mining country are 
introduced; more money is put to the stock 
trading account, and the bankers have three 
or four active customers, who are in and out 
of the market, usually in quick turns, making 
about as much as they lose, or, if losing, the 
amounts are small, and the accounts can be 
kept active for a long time. 

With such reputable backing as the bankers 
have given, with such shrewd, successful men 
operating the proposition, with such wonderful 
stories as are now circulated, the stock of the 
mining company this group of men represent 
begins to attract attention. The bankers buy 
some shares, many of their clients buy, people 
in the open market buy, the stock goes up, the 
greatest bonanza ever known has come out of 
the west, there is a scramble for shares, an ac- 
tive market for a time; the papers contain re- 
ports and interviews, all paid for, of course. 
What reporter ever wrote who would not make 
comments for a reasonable fee? Then comes a 
time when the miners must go back to see to 
the operations of their property. For a while 
the market keeps up, then begins to sag, the 
bankers send for information, but it is slow 
in coming; inquiries are sent to them from all 
about, and the stock goes lower ; then comes a 
day when the bankers must reluctantly admit 



AND HOW TO JUDGE THEM 143 

that where they had taken the word of their 
pleasant, active customers, they find on in- 
vestigation that the grossest exaggerations 
have been practiced on them, and they must 
confess that they have been taken in. Yet 
from time to time it is whispered about that 
not all bankers are taken in, some retain a 
share of the plunder, and make loud invectives 
against mining in general and the proposition 
in particular which lately they were backing; 
and when the discontent and criticism has sub- 
sided, they presently, that is some of them, be- 
come interested in another mine. 

Not always are the bankers in friendly rela- 
tion for profit with the mining promoters of 
questionable propositions; frequently they are 
genuinely stuck, and some are known to have 
refunded all the money which had been placed 
in a worthless enterprise through their mis- 
guided influence. It has been said that the 
wealthy brokerage houses doing a banking 
and stock business are the most easily taken 
in and caught by an exaggerated mining propo- 
sition, if only one or two active accounts are 
first introduced to make easy the presentation 
of the scheme. What is so respectable as an 
active account? Of course the mines coming 
from such a source are good; and the banker, 
densely ignorant of mining, though it is one 



144 MINING INVESTMENTS 

of our greatest industries, makes of himself 
an easy mark.. There are few honest mines 
offered in the great financial centers, the 
bankers are too sneeringly supercilious. Min- 
ing? They could not consider it. It is related 
that a man with an honest face and a pocket 
full of specimens stood once on the steps of a 
banking house and said under his breath: 
"Well, I'll be damned." He had a good propo- 
sition, one worthy of investigation, and had 
come east to find someone who would help 
him float it. He did not have money to open a 
fancy account, he was looking for someone who 
would take an interest in his proposition, and 
had been sneeringly turned down. Such had 
been his experience in a good many places. 
Finally he got in with some outside promoters 
and they floated the proposition. The papers, 
that is some of them, published attacks, criti- 
cising those who had taken the matter up, who, 
according to what the papers said, were fit 
subjects for criticism. Still the proposition 
grew, and found favor; and presently a great 
mining boom had developed. Nevada was 
brought to life again, treasure had been found; 
a real series of great mines had been dis- 
covered, a business running into hundreds of 
millions was being transacted; but among the 
greater bankers and brokers not the percent- 






AND HOW TO JUDGE THEM 145 

age represented by the fraction of a mill was 
transacted, the whole great business went to 
others. The bankers had not lived up to their 
public duty, they had no means and sought no 
information by which they could intelligently 
advise in regard to mining propositions; and 
there being no established places in which one 
could be advised, any proposition could be 
floated on the tide of excitement, resulting in 
the sale of questionable shares to the extent of 
millions of dollars: all, or the greater part of 
which at least, could probably have been saved 
had the bankers done the duty which their 
public positions would seem to require of them, 
and had taken the same care in regard to min- 
ing stocks which they take in regard to railway 
and other propositions. 

If honest work were done the different trans- 
actions would be something like the follow- 
ing. A miner or prospector visiting a promi- 
nent banking house with a proposition would 
be heard and his claims given to a suitable per- 
son, perhaps an employe in charge of the min- 
ing interests, who would investigate, and find- 
ing the proposition questionable would so re- 
port to the house, but finding it desirable the 
business would probably be taken up, a min- 
ing engineer and an economic geologist would 
be called: and if they found it favorable, a 



146 MINING INVESTMENTS 

banking house of standing would presently be 
offering a desirable mining stock, and a repu- 
table promoter retained by them would be 
pushing about and developing a market; then 
it would be that the prospector, the promoter 
and the banker would have been brought to- 
gether on a proper basis to serve the investor. 
If such ever comes to be an established cus- 
tom and investors will seek their bankers as 
the proper medium through which to obtain 
mining stocks, and if the bankers, not unmind- 
ful of their public duty, have at their command 
real advice from competent engineers, geolo- 
gists and local representatives near the mines, 
a sort of Utopian condition will develop in min- 
ing; and very few questionable propositions 
will be able to get through the offices of 
watchful banking houses, and reach the public 
to the disadvantage of those who may invest. 



XVII 

Mining Engineers of Divers Kinds. 

Some to Trust and Some 

to Avoid 

It is the man behind the gun who wins the 
battle, and it is the man who overcomes the 
difficulties of operation who finally makes the 
mine a success. 

A great mine owner once said: "It is easier 
to get a mine than a man. Give me a man and 
I will get the mine." There is much of truth 
in this saying, and many a good mine has been 
spoiled by poor management. 

There are various kinds and varieties of min- 
ing engineers ; there is the genuine article with 
suitable credentials, there is the man who has 
taken the profession up and sort of just worked 
into it, and there is the mining engineer who 
does his mining in barrooms and hotel corri- 
dors. These latter are the men who mostly 
get up schemes, and do as they would not be 
done by, which in modern slang can be ex- 
pressed "Do the investors." Loud talking, 

147 



148 MINING INVESTMENTS 

bragging, swaggering — these are the charac- 
teristics of the man who does his mining in 
barrooms and hotel corridors; when such are 
met avoid them. 

Those mining engineers who have taken up 
the business and just sort of worked into it are 
generally known by their contempt for techni- 
cal training, and their boasting approbation 
for practical mining. When dealing with such 
men be a little careful, they frequently gradu- 
ate into the class who mine in barrooms; but 
some of them are eminently practical, well in- 
formed men, whose advice and guidance are 
often of the highest merit and value. In min- 
ing there is no school which can turn out such 
valuable men as the "School of Hard Experi- 
ence." Only very few really graduate, because 
to become a well informed mining engineer, 
possessed of both knowledge and experience, 
one must have worked under varying con- 
ditions, and must have had the energy and 
strength to have spent long hours at study 
after an arduous day's work had been done. 
There are such mining engineers ; usually they 
are not boastful, but their services are invalu- 
able. The trouble with most mining engineers 
who have not had a regular course of technical 
training is that they have not done the study- 
ing to obtain the information which an engi- 



AND HOW TO JUDGE THEM 149 

neer should have, and as a consequence their 
work is superficial. A man who faithfully 
studies while working in the mines can, after 
about twenty years of effort, observation and 
study, consider himself a graduate of the 
"School of Hard Experience," and will have 
obtained all which the college boy will attain 
in his four years course, and a great deal more 
besides which the college graduate will prob- 
ably never attain; and often the graduate in 
the school of experience may justly consider 
his attainments far above those of the ordinary 
technically trained mining engineer, but in the 
"School of Hard Experience" there are very 
few real graduates. 

Then we have the regular graduated mining 
engineers, all of them exceptionally well in- 
formed men, most of them capable of in- 
telligently applying what they know, and some 
few of them combining the technical training 
with real and varied experience; such men 
are the real leaders of the profession, and if 
any investor is so fortunate as to know such a 
man, let him be wise, and keep putting money 
into the mining propositions his friend may ad- 
vise, and the chances are he will become rich. 

Besides these there are the practical miners, 
men who have devoted lives to work in the 
mines, many of them with good hard sense, 



150 MINING INVESTMENTS 

but informed in too limited a scale to be safe 
guides in relation to mining investments ; often 
they make the most excellent mining superin- 
tendents and managers, but just as often they 
undertake works of developement, and follow 
flights of ambitious fancy into realms which 
they do not understand ; then they make heavy 
losses, and bring disaster to the enterprise 
which has been intrusted to them. 

When a mine is put in operation some one 
or another of these different classes of mining 
engineers is probably in charge, excepting only 
the engineers who do their mining in bar- 
rooms and hotel corridors. Such men usually 
never see a mine, or if they do, it is a super- 
ficial examination only, a visit, an outing, 
drinking and big talk — a grand time; but 
very little practical consideration of the mine. 



XVIII 

The Gist of the Whole Matter 

Does one want to become rich — one can be- 
come rich through intelligent investments in 
mining stocks, but not without working. In- 
vestigate — that is the gist of the whole matter. 
One may make some money by a lucky stroke 
in a mining risk, but if one is lucky one does 
not need to be rich, and then very few people 
are lucky, most have to work for what they 
obtain; and to obtain good results in min- 
ing propositions the work required is that one 
should investigate, and do it for one's self, not 
depending on others. We have read of a great 
many things and conditions relating to mining, 
from such reading one should know along 
what lines to investigate; and if one does the 
work, makes real personal investigations, and 
puts together the independent testimony re- 
ceived from different sources, and then uses 
good judgment; remembering that nothing is 
sure in mining, that it is a speculation, not an 
investment; that even with the best care losses 
must be expected, and that the money is placed 

151 



152 MINING INVESTMENTS 

for a great winning or a total loss, because 
there is no middle ground, if the mine doesn't 
pay it is a total loss, but if it does pay it is a 
tremendous profit. One can afford to lose 
something where such great profits are had, 
but if one just buys mining stocks on the 
recommendation of others, and takes the 
chances, the chances are that one will lose with 
disheartening regularity ; but if one will do the 
work, and really investigate, one will make 
money a great many times, and this is the gist 
of the whole matter. A great many minor 
points must be examined, but principally one 
must know three things : first, that the parties 
soliciting the use of his money have got a 
good thing; second, that they have the ability 
to obtain good results out of a good thing and, 
third, getting such results that they are honest 
enough to give him his just proportion of what 
they obtain. 



XIX 

A Financial Plan Which Should Lead 
to Success in Mining 

In concluding this work I desire to present 
an outline of a proposition which, if a mining 
promoter were willing to accept, it could be 
taken as assurance that he meant to do what 
was right. It is probable that few mining 
promoters would accept such a proposition, 
still it might be well for those who think of 
investing in mining stocks to have the proposi- 
tion before them to use as a test in replying to 
mining solicitations for capital. If a man 
soliciting money would accept a plan as follows 
it would be a very good indication in his favor. 

First: Show reports and recommendations 
of competent engineers, or experienced mine 
operators; with specifications of the money 
required to make the mine successful. 

Second: Prove that the specifications are 
correct by offers from responsible mining 
contractors to do the work specified for the 

153 



154 MINING INVESTMENTS 

amount named by the engineer, or experi- 
enced mine operator. 

Third : Solicit money from investors to pro- 
vide for the work required on a subscription 
basis only, the subscriptions payable to a trust 
company or individual trustee, and to be avail- 
able for the use of the mine when the amount 
required has been fully subscribed. If the 
amount required is not obtained, money to be 
returned to subscribers. 

Fourth: On sufficient funds being sub- 
scribed, let the trustee apply the same to pay- 
ments for carrying out the requirements as 
specified by the engineer, or experienced mine 
operator. No money to be paid over for the 
use of promoters. 

Fifth: When the work is completed, with 
the mine equipped and opened, let the property 
be turned over by the trustee to a board of 
directors elected by the actual subscribers who 
have paid their money. 

On this basis mining will pay the investor, 
and selling mining stocks for the benefit of pro- 
moters will not be possible, yet mine owners 
and promoters can fully share in the legitimate 
profits obtained from a mine. 



APPENDIX 

How to Calculate the Values of 
Mining Stocks* 

No investments present such vicissitudes of for- 
tune as mining ventures. There is scarcely a man 
in our country who has not at one time or another 
purchased mining shares in the hope that he might 
secure an investment comparable to those glittering 
examples of success so industriously advertised by 
the promoter. Yet mining is a good business, and 
it is desirable that investors should purchase min- 
ing stocks. 

It is difficult for those not informed in regard to 
the technicalities of mining to exercise good judg- 
ment as to what they should and what they should 
not purchase, and, unfortunately, very few are suf- 
ficiently informed to know even what points should 
be examined, and what questions asked, in order to 
form an opinion on mining investments. 

The following statements, calculations and tables 
represent an effort to bring together material which 
may be a guide to the proper understanding of the 
risks and opportunities in mining ventures. 

Certain facts, given below, should be borne in 
mind when considering this class of investment. 

1. There is no middle ground in a mining invest- 
ment; it is either a total loss or a profit. In other 
enterprises a reduced rate of interest or even losses 
may be recovered later by better business; but if 
mine does not pay it is a total loss. 

* Reprinted by permission of the Mining "World from a series of 
articles by Dr. Nicholas published in that journal. 

155 



156 MINING INVESTMENTS 

2. There is no mine so great it cannot be ex- 
hausted, consequently, all mines must be worked 
out in time, and each ton of mineral taken out brings 
the property one ton nearer to the point where all 
the mineral will be exhausted, leaving an empty shell 
of stopes and shafts from which no further returns 
can be expected. 

3. The all important question is not the dividends 
a mine may be paying, but the quantity of mineral 
remaining underground from which dividends can 
be earned. 

4. Mining, because of the possibility of rapid 
changes from nothing to discoveries resulting in 
enormous wealth, becomes an absorbing passion. 
Hence the miner frequently loses his judgment in 
his hopes like the gambler expectant of good for- 
tune. 

5. When enthusiastic statements are made about 
a property to encourage investments one should not 
be skeptical of the miner's honesty, but should make 
careful inquiry and consult the tables herewith pre- 
sented for estimating the average risk, then, if the 
results seem favorable, the investment may be con- 
sidered. 

The following inquiries should be made before 
purchasing any mining stocks, no matter how allur- 
ing the prospectus. 

1. Does the company actually own its property? 
This can be learned by examining the record of the 
company's titles. 

2. Are there any debts? This can generally be 
learned from the reports made by the company's 
officers, because if they make false statements they 
become crimnially liable. 



AND HOW TO JUDGE THEM 157 

3. Has the mine been examined by a competent 
mining engineer, or economic geologist? Inquiries 
should be made as to where the person writing the 
report pursued his studies, what practical experience 
he has had and what recognition has been given his 
work by technical institutions. 

4. Do the people who are interested in the com- 
pany understand mining as a business? This can 
be learned by making inquiries among people asso- 
ciated with reputable mining companies, and from 
the references presented by the parties interested. 

5. Are the people managing the company worthy 
of confidence? For this information consult their 
references, and the mercantile agencies. 

If, after making the inquiries outlined above, it 
is found that the company does not actually own 
but proposes to acquire a property it may have 
under contract (option); or that debts are accumu- 
lating, or that the report recommending the prop- 
erty is made by a person of inferior attainments; 
or that the people interested in raising the money 
are simply brokers or promoters and not men of 
practical experience in mining proper; or if the man- 
agement of the company is not worthy of confi- 
dence, then the proposed investment should be most 
cautiously considered and accepted only on evidence 
of very strong counterbalancing advantages. 

If, however, the inquiries made are answered sat- 
isfactorily, the investment may be considered with 
favor, but it will always be subject to the chances 
of fortune common to all mining operations. What 
the chances of fortune are may be approximately 
estimated by using the tables herewith. 

Mining stocks are valued only by the dividends 
they will pay. These payments can be maintained 



158 MINING INVESTMENTS 

only so long as valuable mineral is mined, after 
which the stock of the company is worthless. There- 
fore, the cash value of a mining stock should be the 
present worth of prospective dividends. The chance 
of not receiving the dividends is always threatening, 
but there is also in every mine some opportunity 
for rich discoveries which will result in a higher 
rate of dividend; these two elements of risk in some 
measure balance each other. While the present 
worth of prospective dividends is a fair basis on 
which to calculate the value of a mining investment 
this alone is not sufficient; one must be a keen judge 
of future prospects, and be well enough informed 
to know how much valuable mineral may remain 
in the mine, because from this "reserve" only can 
dividends be paid. 

The life of a mine, that is the period during which 
it can pay dividends, is variable. There are a few 
famous mines which are apparently inexhaustibly 
supplied with ore, but such mines are rare. Since 
the life of most mines is limited a cautious investor 
in figuring a present worth for prospective dividends 
should make his calculations on a short dividend 
paying period, except when considering well estab- 
lished mines with substantial ore reserves. 

Following is a table of mining values, without 
interest, based on 20 per cent, dividends, the amount 
invested being $100. 

Dividends I,oss if 

Year received mine fails 

First $20 80% 

Second 40 60% 

Third 60 40% 

Fourth 80 20% 

Fifth 100 Nil, except interest 

Should the mine continue to pay after five years 
the values then remaining are clear profit. In this 



AND HOW TO JUDGE THEM 159 

simple table, however, interest is not taken into 
account. A comparison may be made between $100 
invested at 6 per cent., and $100 invested in mines 
at 20 per cent., crediting the 6 per cent, each year 
to the secured investment, and deducting the 6 per 
cent, each year from the mining investment. Re- 
member that 20 per cent, return on a dangerous in- 
vestment is not 20 per cent, net profit, since the 
money would produce 6 per cent, on a better secur- 
ity; the real profit is the difference, or 14 per cent, 
annually. 

The following table shows the value of mining 
investments as compared with investments whose 
principal is secured. Mining investments to pay 20 
per cent., secured principal to pay 6 per cent, per 
annum. Amount invested $100 in each case: 

$100 on Good Security $100 in Mining Stocks 

Year Int. 6% 



First $ 6 

Second 12 

Third 18 

rth 24 

Fifth 30 

36 

Seventh 42 

Eighth 48 

Ninth 54 

Tenth 60 







Divi- 


If mine 




Year 


dend, 20% 


fails 


Amt. 








$106 


First ... 


. .. $ 20 


86% loss 


112 


Second . 


40 


72% loss 


118 


Third .. 


60 


58% loss 


124 


Fourth . 


80 


44% loss 


130 


Fifth ... 


100 


30% loss 


136 


Sixth ... 


120 


16% loss 


142 


Seventh 


140 


2% loss 


148 


Eighth . 


160 


*$1 2 profit 


154 


Ninth . . 


180 


t 26 profit 


160 


Tenth .. 


200 


X 40 profit 



* Equal Vo lJ-4% per annum for the eight years, 
t Equal to 2.88% per annum tor the nine years. 
t Equal to 4% per annum for the ten vears. 

At the end of the tenth year it is apparent that 
a mine paying 20 per cent, in dividends per annum 
has returned the principal and 100 per cent., but it 
is not so readily understood that this 100 per cent, 
cannot be considered as net profit. The same money 
on reasonable security would have produced $60, and 
if at the end of the ten years the mine is exhausted 



160 MINING INVESTMENTS 

the returns will be $100 principal, $60.00 interest and 
$40.00 profit, the mine produced $200, and the real 
profit in ten years is $40, equivalent to 4 per cent, net 
profit per annum after deducting principal and inter- 
est. If at the end of ten years the mine is exhausted 
the profit has been only 4 per cent., but should it con- 
tinue to pay the profit is larger. From the tabu- 
lated results the conclusion is reached that, after 
allowing for principal and interest, if the mine pays 
20 per cent, for eight years, there is a slight profit ; 
if for ten years, it is a fair profit, and if it pay 20 
per cent, more than ten years there is a very good 
profit. 

Ten years, however, may be regarded a rather 
long average for the life of most mines, but with 
a dividend of 20 per cent, the money invested is re- 
turned in five years, at the end of which period the 
loss, if the mine fails, is simply the interest. A fair 
calculation in determining the value of a mining 
share is five years' dividends estimated at the rate 
the mine may be paying. If the mine were well es- 
tablished the time for calculating the value of its 
shares might be extended to ten years, but if the 
shares were purchased on such a valuation the in- 
vestor would require ten years' continuous dividends 
before his money could be returned without interest, 
and this is a rather slow proposition. 

In some great mines where large ore reserves, 
sufficient for many years' working, have been 
proved up, the shares become a business proposition, 
and their value can be safely estimated according to 
the worth of the ore in sight and the cost of mining 
and milling it; but for ordinary mines the tables 
above will be found serviceable in estimating stock 
values. 



AND HOW TO JUDGE THEM 161 

If the values of mining shares are calculated 
at compound interest the results will be much more 
favorable to the investment, but as there is always 
a risk that the mine may fail, compound interest 
valuations cannot be considered equitable, excepting 
that a deduction is made to allow for this risk, this 
deduction bringing the computation to about the 
basis of simple interest; therefore a compound in- 
terest calculation should be considered only as an 
interesting tabulation of values to be obtained if the 
mine continues paying for a long term of years. 

The table below shows the returns from mining 
shares paying 20 per cent, per annum (dividends re- 
invested in the same mine at the same rate annually) 
as compared with money at 6 per cent, compound 
interest on good security. Amount invested in each 
case is $100. 

Year Interest 6% Amount 

First $6.00 $106.00 

Second 12.36 112.36 

Third 19.10 119.10 

Fourth 26.25 126.25 

Fifth 33.83 133.83 

Sixth «. 41.86 141.86 

Seventh 50.37 150.37 

Eighth 39.39 159.39 

Ninth 68.95 168.95 

Tenth 79.09 179.09 

Year Dividend 20%, reinvested 

First $20.00 86% principal remaining at risk 

Second 44.00 69.36% principal remaining at risk 

Third 72.80 46.30% principal remaining at risk 

Fourth 107.36 18.89% principal remaining at risk 

Fifth 148.83 15% Gain, 3% per annum 

Sixth 198.60 56.74% Gain, 9.46% per annum 

Seventh 258.32 107.95% Gain, 15.42% per annum 

Eighth 329.98 170.59% Gain, 21.32% per annum 

Ninth 415.98 247.03% Gain, 27.44% per annum 

Tenth 519.18 340. 097o Gain, 34.01% per annum 

From these tables, calculating the value of mining 
shares, one at simple, the other at compound, in- 
terest, it is evident that a mine paying 20 per cent. 



162 MINING INVESTMENTS 

annually for ten years and then failing would have 
returned at simple interest an amount equal to 4 
per cent, per annum profit above the return from a 
secured investment paying 6 per cent. A simple in- 
terest investment account is one where the income 
is used and produces nothing more for the person 
receiving it. Where the dividends are reinvested 
(which unfortunately is not frequent), the invest- 
ment account can be considered on a compound in- 
terest basis, and at the end of the tenth year will 
have shown earnings equal to 34.01 per cent, per an- 
num above the highest ordinary rate of 6 per cent, 
per annum. This calculation is theoretical, for if 
at the end of ten years, or at any previous time, the 
mine became exhausted, all the money invested 
would-be lost, though the investor had received an 
amount equal to 34 per cent, more than the 6 per 
cent, rate per annum. Here the act of investment, 
not the calculation, would be at fault. 

This condition emphasizes the importance of the 
question, How far is it safe, or speculatively de- 
sirable, to invest in the shares of an old mine which 
has paid dividends for any considerable period? 

As an average proposition to invest on the basis 
of a cash price equal to five years' dividends seems 
reasonable, the probabilities of receiving one's money 
again are fair and it is also likely that at the end 
of five years the stock will still be worth something, 
perhaps nearly as much as the original investment, 
thus making mining investments attractive to those 
who understand them. As a matter of fact, how- 
ever, the mine in which an investment has been 
made must at some time become exhausted, sug- 
gesting that mining stocks should never be consid- 
ered as permanent investments. It is for this reason 



AND HOW TO JUDGE THEM 163 

that conditions relating to the future of a mining 
property should be carefully studied. 

An Inquiry in Relation to the Prospective Values 
in an Old Dividend Paying Mine. 

It is usual that stocks in old established mines 
sell above their worth because the claim for almost 
unlimited mineral deposits is more easily maintained 
in the case of a large producer than for a property 
that has yet to make its reputation; though it may 
be that the large producer is rapidly approaching 
the time when, its mineral deposits becoming ex- 
hausted, it will be of no further value. There are, as 
previously stated, famous mines with apparently an 
almost unlimited quantity of mineral to draw from, 
but these properties are few in number, while un- 
fortunately many mines once famous are now aban- 
doned, or they are struggling along in hopes of un- 
covering new mineral bodies. A mine at the height 
of its greatest prosperity may be in rapid approach 
to its point of final exhaustion. In view of these 
conditions the following points should be considered 
in estimating the value of stocks in an established 
mine. 

First — Calculate the value of the whole mine as 
represented by the price of its shares. To ascertain 
this, multiply the price of one share by the total 
number of shares. Is the mine worth that much? 

Second — In all established mines a portion of the 
value is, or ought to be, secured by mineral in sight. 
Take the estimated value of the mineral in sight, 
less mining and milling charges, and divide it by 
the number of shares in the whole mine; this will 



164 MINING INVESTMENTS 

show what proportion of assured value there is for 
each share, and this assured value can be compared 
with the price of the shares to ascertain how much 
of that price is for assured values, and how much 
for prospective values. 

In estimating the ore in sight, and in estimating 
the assured value of a property's shares an allow- 
ance should be made for the risks in taking the min- 
eral out, and the dangers attending mining. In- 
quiry should also be made as to whether the mineral 
in sight is blocked out and measured, or whether 
it is in sight simply by estimates from surround- 
ing conditions; in the latter case a considerable re- 
duction should be made to allow for the risks of 
errors in estimating mineral in sight without actually 
measuring it. 

Third — Treat the unseen portions of the mine 
from precisely the same point of view as one would 
in considering an undeveloped property. In an es- 
tablished mine great returns are always expected 
from its undeveloped ground because of its past 
record, and for this there is frequently good reason 
but the undeveloped ground has not been seen, all 
unseen ground is a risk, and the future of dividend 
paying mines in relation to their undeveloped 
ground is a risk, on the same basis that any unseen 
ground or prospect is a risk. In a dividend paying 
mine, however, one has more data to estimate what 
the risk really is. In estimating the chances for a 
future profit beyond the value of the mineral in 
sight treat all the unseen ground as a prospect and 
be guided accordingly. 

Misapprehension is frequently by reason of the 
high par value that is often placed on mining shares. 
In the other extreme the true position of a share- 



AND HOW TO JUDGE THEM 165 

holder is frequently obscured because of the issue 
of a great number of shares at a low par value. 

Under the laws of many states mining stock can 
be issued in excessive amounts full paid in consider- 
ation of a mine transferred to a company in ex- 
change for its stock. The way is open for exces- 
sive capitalization, and this is frequent. In consid- 
ering the offer of a $1 share for five cents, or a $10 
share for 50 cents, or a $50 share for $2.50, the par 
value should be entirely disregarded. The par value 
of the shares is not the point an investor should 
consider; the real question is, How many shares are 
there? If there are 100,000 shares selling at 50 cents 
each, the whole mine is selling on the basis of $50,- 
000, and the owner of one share holds 1-100,000 of 
that property. If in the same mine there are 1,000,- 
000 shares selling at 5 cents each, the property is 
marketed on the basis of $50,000; but the holder of 
one share has only 1-1,000,000 of the whole property; 
and it matters not whether a share has a par value 
of $1 or $1,000, the owner will be entitled to his 
pro rata of the value of the ore taken out of the 
mine after deducting expenses, and nothing more. 

Table for Determining Approximately the Propor- 
tionate Risk in a Mining Investment. 

Table of assured values for mineral in sight, and 
the proportionate risk for unseen ground: 

The mineral in sight rep- For the unseen ground. 

resents of the amount The risk is for the total 

invested. amount invested. 

100% o* 

95 5 

90 10 

85 15 

80 20 

75 25 



166 MINING INVESTMENTS 

The mineral in sight rep- For the unseen ground, 

resents of the amount The risk is for the total 

• invested. amount invested. 

70 30 

65 35 

60 40 

55 45 

50 50 

45 55 

40 60 

35 65 

30 70 

25 75 

20 80 

15 85 

10 90 

5 95 

100 

To ascertain the approximate chance of obtain- 
ing a profit for the risk taken use the following 
table as directed. 

The table is arranged in ten columns, each col- 
umn representing one of the conditions because of 
which the vicissitudes of mining investments usually 
arise. Through the columns ten spaces are 
ruled, and in each space a grade of condition is 
noted from the very best conditions that could be 
found placed at the top of the column and rated as 
ten; that is, ten chances in ten, or a certainty, of a 
profitable investment; to the poorest conditions 
from which any possible returns could be had, placed 
in the next to the last line of spaces, and rated as 1 
and representing only one chance in ten of a profit- 
able investment. The spaces are rated as 10 down 
to 1 and a line of spaces rated as is added to the 
table to represent the conditions under which it is 
impossible that profits could be made from a mining 
investment. 

The cost of mining and delivering the mineral is 
a risk, and in the maintenance of the engineering 
on an efficient basis there is a slight risk; these can 



AND HOW TO JUDGE THEM 167 

generally be calculated and are therefore not tabu- 
lated. 

There is some risk because of unskilled or dis- 
honest management, but American laws provide the 
means by which an investor can protect himself in 
such matters; and as a general proposition this risk 
can be allowed for by deducting one-half to one 
chance in ten from the results found by using the 
table. 

Before proceeding to an examination of the table 
it may be well to consider briefly what an element 
of chance really represents. 

Among the tabulated classifications even chances 
are represented by five. A familiar example of even 
chances is matching pennies, the chances are exactly 
equal; and it is a remarkable fact that if some 
thousands of pennies are matched it will be found 
that they are almost equally divided. An investor 
putting money in a mine where the chances are 
equal has the same opportunity to make a profit as 
if he were matching pennies. If the chances are as 
four in ten, or one less than even, he takes the 
same risk as he would when matching pennies under 
an obligation to give away one out of every five he 
secured; if the chances were as three in ten it is as 
if two out of every five secured were given away, 
and so on through all the table. Where the rate is 
better than even chances the relation can be ex- 
plained by supposing additions to the winnings in 
the same proportion as stated for reductions from 
the winnings where the risks are rated below even 
chances. 

No man can be infallible in judging and estimating 
unseen ground, and mines considered absolutely 
worthless have returned remarkable profits, while 



168 MINING INVESTMENTS 

mines reported on as the best by competent authori- 
ties have later proved disastrous failures; but such 
instances are extremely rare, and should not be con- 
sidered by a careful investor. 

In writing of mining risks and chances as com- 
pared with matching pennies a more accurate basis 
might be the comparison as above stated with the 
chance added that a great prize might be had with 
one or more of the pennies secured; such a chance 
certainly exists in mining, and is the reason why 
almost every bit of mineral found, even though the 
surroundings are unfavorable, is prospected and gen- 
erally opened to a considerable extent under a dead 
loss because of hopes that it may lead to a valuable 
deposit. 

Explanations For Using the Table. 

First — Ascertain the assured value from a cal- 
culation or estimate of the value of the mineral 
in sight; deduct from this a reasonable sum for 
the risk and expense of mining, milling and mainte- 
nance as the circumstances may require. The re- 
sult will be an estimate of the assured values which 
may be credited to the mine, and which divided by 
the number of shares will give the assured value 
per share. If the assured values indicate a profit 
on the amount invested it is a business proposition 
to which the investor may add the chances for a 
further profit as may be indicated by an estimate of 
the value of the unseen ground as shown in the 
table. If, however, the pro rata of assured values 
per share do not equal the price at which the stock 
is offered, the difference is at risk. 

Second — After estimating the assured values let 



AND HOW TO JUDGE THEM 169 

all the balance of the proposed investment be for 
unseen ground and taken as a risk. Estimate the 
chances in this risk by considering each column of 
conditions in the larger table and check in each col- 
umn the division which most nearly represents the 
conditions at the mine. Add together the values 
tabulated for each division which may have been 
checked, and divide by ten, the result will be ap- 
proximately the average chances in ten for a profit- 
able investment under the conditions surrounding 
the property which may be under consideration. 

To allow for the risk of loss because of unskilled 
cr dishonest management subtract one-half to one 
or even more from the results obtained as the case 
may require. 

Third — If the mine is simply a prospect proceed 
in the same manner, but without allowing for as- 
sured values because of mineral in sight. 

Fourth — Wherever a zero condition is found indi- 
cating circumstances under which it would be an 
impossibility that any returns could be had do not 
make an average of chances, because one zero con- 
dition could not be compensated by other conditions, 
however favorable, and where a zero condition is 
found for a property which may be under consider- 
ation that property should be rejected. 

I. 

Amount of Ore and Associated minerals in Sight. 

10. Assured. 

Unusually extensive. 
9. Superior. 

Extensive. 



170 MINING INVESTMENTS 

8. Very good. 

Large. 

7. Good. 

Above average. 

6. Fair. 

Rather good. 
5. Passable. 

Fair average. 
4. Poor. 

Rather inferior. 
3. Very poor. 

Inferior. 
2. Bad. 

Small. 
1. Very bad. 

Very small. 
0. Outclassed. 

Tiny bits of no importance. 

II. 

Condition and Extent of Walls, Roofs, Floors or 

Outcropping. 

10. Assured. 

Unusually regular and extensive. Unmistak- 
able evidence of continuity and permanence. 

9. Superior. 

Regular and extensive, good evidences of con- 
tinuity and permanence. 

8. Very good. 

Fairly regular, fairly extensive, with some 
evidences of continuity and permanence. 

7. Good. 

Slightly irregular, fairly extensive, not against 
probable continuity and permanence. 






AND HOW TO JUDGE THEM 171 

6. Fair. 

Irregular, fairly extensive, continuity and 
permanence not indicated, but reasonably 
in expectation. 
5. Passable. 

Irregular, not extensive. Continuity and 
permanence somewhat doubtful. 
4. Poor. 

Decidedly irregular, not extensive, continuity 
and permanence doubtful. 
3. Very poor. 

Broken and irregular, rather small, evidences 
rather against continuity and permanence. 
2. Bad. 

Broken, very irregular and small. Evidences 
against continuity and permanence. 
1. Very bad. 

Very irregular and very small. Evidences 
decidedly against continuity and perma- 
nence. 
0. Outclassed. 

Continuity and permanence demonstrably im- 
possible. 

III. 

Chemical and Physical Conditions of Surrounding 
Formation in Relation to the Mineral Found. 

10. Assured. 

Unusually favorable. Very regular. Broadly 
continuous, demonstrating depth or extent. 
9. Superior. 

Favorable, regular, continuous. Promising 
depth or extent. 



172 MINING INVESTMENTS 

• 8. Very good. 

Neither favorable nor unfavorable. Regular, 
continuous, promising depth or extent. 

7. Good. 

Favorable but irregular. Possible change to 
unfavorable. 

6. Fair. 

Favorable but irregular, broken. Might 
change to unfavorable. Some indications 
of faults. 

5. Passable. 

Neither favorable nor unfavorable. Irregular 
broken. May become unfavorable. Some 
faults indicated. 

4. Poor. 

Chemically unfavorable to mineral found, 
but very regular, promising depth or broad 
extent of formation. 

3. Very poor. 

Chemically favorable, but very irregular. 
Badly broken, serious faults indicated. 

2. Bad. 

Neither favorable nor unfavorable. Very ir- 
regular, badly broken. Serious faults indi- 
cated. 

1. Very bad. 

Unfavorable, very irregular, badly broken. 
Serious faults clearly indicated. 

0. Outclassed. 

Under which the mineral found could not exist 
in merchantable quantities. 



AND HOW TO JUDGE THEM 173 

IV. 

Extent and Distribution of Mineralization Within 
the Deposit. 

10. Assured. 

Unusually regular, even and continuous; de- 
monstrating permanent, very extensive nu- 
meralization. 
9. Superior. 

Regular, continuous, promising permanent ex- 
tensive mineralization. 
8. Very good. 

Continuous, not entirely regular, slight doubts 
as to permanent extensive mineralization. 
7. Good. 

Continuous, somewhat irregular, some por- 
tions might be unprofitable. 
6. Fair. 

Continuous but uneven. Indications that 
some portions would not be profitable. 
5. Passable. 

Not entirely continuous, uneven. Indications 
of some unprofitable zones. 
4. Poor. 

Not continuous, decidedly uneven. Indica- 
tions of unprofitable zones. 
3. Very poor. 

Distribution so irregular, workable only by 
sorting, unprofitable zones. 
2. Bad. 

Very irregular, spotty. Much dead work to 
obtain any good material. 



174 MINING INVESTMENTS 

1. Very bad. 

Spots only. Doubts of sufficient good ma- 
terial to compensate working. 
0. Outclassed. 

Mineralization in small isolated spots where 
demonstrably no profit could be maue. 

V. 

Value of Mineral Found. 



10. Assured. 

Better than the highest commercial grades. 
Profits amply secure beyond possible fluctu- 
ations. 
9. Superior. 

A high commercial grade, margin of profit 
commercially sure. 
8. Very good. 

Commercial grade of fine. Profits secure ex- 
cept during great depression. 
7. Good. 

Commercial grade good, margin of profit se- 
cure under ordinary conditions. 
6. Fair. 

Commercial grade fair, margin of profit sub- 
ject to market fluctuations. 
5. Passable. 

Commercial grade salable. With favorable 
market fair margin of profit. 
4. Poor. 

Sufficient to pay expenses but no profit. 
3. Very poor. 

A loss but not over 33 1-3 per cent. Worked 
in hopes of better development. 



AND HOW TO JUDGE THEM 175 

2. Bad. 

A loss but not over 50 per cent. Worked in 
hopes of better development. 
1. Very bad. 

Loss more than 66 2-3 per cent. Worked on 
speculation for better developments. 
0. Outclassed, 

So low that no profit would be possible. 

VI. 

Composition of Mineral and its Facilities for Treat- 
ment. 
10. Assured. 

Unusually favorable yielding finest results by 
simplest treatment. 
9. Superior. 

Favorable, yielding satisfactory returns by 
ordinary treatment. 
8. Very good. 

Generally favorable. Results a little below 
expectations by ordinary treatment. 
7. Good. 

Slightly complex. Results fairly profitable; 
not entirely satisfactory by ordinary treat- 
ment. 
6. Fair. 

Complex, some profit by ordinary treatment. 
5. Passable. 

Complex. Irregular. A profit by ordinary 
treatment after careful sorting. 
4. Poor. 

Complex, undesirable constituents. Requires 
special treatment before profits can be ex- 
pected. 



176 MINING INVESTMENTS 

3. Very poor. 

Complex, irregular. Undesirable constituents 
make results somewhat doubtful. 
2. Bad. 

Complex, irregular, undesirable constituents 
abundant, grave doubt of successful treat- 
ment. 
1. Very bad. 

Undesirable constituents and conditions very 
prevalent, profits only if successful treat- 
ment can be found. 
0. Outclassed. 

Of such character that no profit could be 

made by any known method. 
VII. 

Natural Supplies Water, Timber, Labor, Etc. 

10. Assured. 

Assuredly abundant at all times at a mini- 
mum cost. 
9. Superior. 

Abundant, easy to obtain, and at a low cost. 
8. Very good. 

Sufficient, not difficult to obtain at ordinary 
cost. 
7. Good. 

Sufficient for ordinary needs during a reason- 
able time. Cost rather above average. 
6. Fair. 

Sufficient with careful management. Cost 
above average. 
5. Passable. 

Rather inferior amounts. Cost decidedly 
above average. 



AND HOW TO JUDGE THEM 177 

4. Poor. 

Inferior, and at a cost to rather tax oper- 
ations. 
3. Very poor. 

Scarce, cost heavy, a serious tax on oper- 
ations. 
2. Bad. 

Deficient, cost a tax on operations sufficient 
to jeopardize results. 
1. Very bad. 

Very deficient. Cost very excessive making 
profits seriously doubtful. 
0. Outclassed. 

So poor and at such cost that no profits 
would be possible. 

VIII. 

Topographical and Physical Conditions. Dangers 
From Excessive Water, Collapses, Poison- 
ous Gases, Etc. 

10. Assured. 

Every facility for mining at a minimum cost 
unusual security against dangers. 
9. Superior. 

Facilities for mining at a low cost. No dan- 
gerous conditions indicated. 
8. Very good. 

No special difficulty or impediment in mining. 
The ordinary dangers only. 
7. Good. 

Slight difficulties to overcome and consequent 
dangers a little above the average. 



178 MINING INVESTMENTS 

6. Fair. 

Engineering difficulties and dangers beyond 
the average, but not at all unsurmountable. 
5. Passable. 

Special engineering to overcome difficulties 
and danger before deposits are available. 
4. Poor. 

Available if special engineering overcomes 
difficulties and dangers. Results somewhat 
doubtful. 
3. Very poor. 

Probably available if special engineering 
overcomes difficulties and dangers. Re- 
sults doubtful. 
2. Bad. 

Questionably available provided special en- 
gineering overcomes difficulties and dangers. 
Chances against successful engineering. 
1. Very bad. 

Possibly available if special engineering over- 
comes difficulties and dangers, but these so 
formidable that results are very doubtful. 
0. Outclassed. 

Engineering dangers, and difficulties which 
demonstrably could not be overcome. 

IX. 

Political Conditions. 



10. Assured. 

Absolute security under good laws and peace- 
ful tenure of occupancy. 



AND HOW TO JUDGE THEM 179 

9. Superior. 

Good security, good laws, peaceful occupancy; 
only the ordinary disturbances of mining 
camps. 
8. Very good. 

Good laws to back enterprise, but some dan- 
gerous conditions in local surroundings. 

7. Good. 

Laws, judiciary and public order not entirely 
secure, nor yet seriously dangerous. 

6. Fair. 

Such that enterprise must depend somewhat 
on its own strength for security. 

5. Passable. 

Such that enterprise must look well to its own 
strength for security. 

4. Poor. 

Beyond the protection of law, but dangers 
not very seriously threatening. 

3. Very poor. 

Beyond the protection of law, threatening 
dangers require strength to protect interests. 

2. Bad. 

Must expect aggression from surrounding 
dangers, and dishonest officials. 

1. Very bad. 

Grave dangers causing doubts as to mainte- 
nance of enterprise under such surround- 
ings. 

0. Outclassed. 

Dangers and complications so great that no 
enterprise could be maintained. 



180 MINING INVESTMENTS 

X. 

Accessibility. 

10. Assured. 

Every advantage, lowest grade mineral 
salable. General supplies at less than ordi- 
nary quotations. 

9. Superior. 

Without difficulties, all but lowest grade min- 
eral salable, supplies at current quotations. 

8. Very good. 

Without difficulties. Distance prevents sale 
of lower grade minerals. Supplies rather 
expensive. 

7. Good. 

Requiring expenditure of capital before any 
but selected grades salable. Supplies ex- 
pensive. 

6. Fair. 

Requiring expenditures before any but high- 
est grade ores could be sold. 
5. Passable. 

So situated that no ore could be sold. Works 
required for milling or smelting. 

4. Poor. 

Requiring works for treatment with some 
danger that machinery cannot be delivered 
on the property. 
3. Very poor. 

Danger of non-successful delivery of machin- 
ery on the property such as require careful 
consideration. 



AND HOW TO JUDGE THEM 181 

2. Bad. 

Distances and difficulties are such that suc- 
cessful establishment of machinery is doubt- 
ful. 
1. Very bad. 

Such that successful establishment of works 
to utilize mineral is extremely doubtful. 
0. Outclassed. 

Inaccessible, where mineral found could not 
possibly compensate for machinery and im- 
provements. 

Mining Risks Compared With Gambling Hazards. 

Having considered the advantages and disadvan- 
tages of a mining venture, and decided whether one 
should or not take the risk, the fact that money so 
used is at hazard, put out for a great winning or a 
total loss, should be fully realized. Mining risks 
are to some extent similar to gambling chances,. with 
the difference that the chances of winning from the 
mines are much more favorable, and furthermore, 
mining is legitimate and honorable, where one suc- 
cess brings prosperity and employment to thousands 
and returns profits sufficient to compensate for nu- 
merous losses. It must be remembered that great 
returns in mining result principally from cheap 
stocks in undeveloped properties or from exploration 
schemes, provided they are honestly conducted. In 
such ventures, however, the money is at stake for a 
great return or a total loss; hence speculative min- 
ing stocks bear some resemblance to lottery tickets. 

The chances in mining are good, the chances in a 
lottery are almost nil; yet it is a remarkable fact 



182 MINING INVESTMENTS 

that were the sale of lottery tickets permitted they 
would be purchased at par to the value of millions 
of dollars monthly; while mining stocks offering a 
better chance for a great winning, as will be shown 
by the following calculations, are difficult to sell 
even at a big discount. 

Chances by Lottery. 

Scheme of the lottery as usually presented by the 
Spanish-American lotteries. All others have been 
suppressed in America. 

Usually 1,000,000 tickets of $1 each are authorized, 
although there is little mention of the number of 
tickets. The prizes are put forward with great 
prominence. Based on one million tickets a tabu- 
lation of the chances would give results as follows: 

Chances of Winning 

Grand prize $30,000 1 in 1,000,000 

10 prizes of 1,000 1 in 100,000 

20 prizes of 500 1 in 50,000 

50 prizes of 100 1 in 20,000 

500 prizes of 10 1 in 2,000 

1,000 prizes of 2 1 in 1,000 

3,000 prizes of 1 1 in 333% 

4,581 prizes. Chances of winning 1 in 218.2 

The chance of winning the capital prize, one in 
1,000,000, is so remote that it is practically no chance 
at all, and the chances of winning $1,000 for $1, one 
in 100,000, are scarcely worth considering; while the 
chance of getting your money back with perhaps a 
prize, one in 218, is so bad that it is not worthy of 
serious consideration. If mining stocks were offered 
on a similar basis they would be simply laughed at, 
yet lottery tickets are eagerly purchased at par, 
many very intelligent people taking a chance on 
them. It is quite possible for a mining stock in a 



AND HOW TO JUDGE THEM 183 

legitimate enterprise not overcapitalized to pay $30,- 
000 for each $1 invested, and the chances of winning 
are better than getting the capital price in a lottery: 
more than this, the chances for substantial retur n s 
from a mining venture are much better than a lot- 
tery. These facts are logically indicated by the fol- 
lowing statements and estimates: 

It can be claimed in reason and as self evident 
that there are not, and have not been, 1,000,000 min- 
ing enterprises in North and South America com- 
bined, and if it can be shown that one mine out of 
them all has returned $30,000 for one, then the 
chances of receiving such a return are better than 
one in a million. 

The Callao mine in Venezuela formerly had a 
great record, though at one time the stock went 
down to a few cents a share. The mine was to be 
abandoned, but one of the men believed in it, bought 
stock at a few cents a share and worked the prop- 
erty himself. He subsequently uncovered the fabu- 
lous gold deposits, since worked out, but which once 
made the mine so famous that a single share was 
reported to be valued at $53,000. I knew this gentle- 
man. Although he lost heavily in following the de- 
cline of the stock, expecting new deposits to be un- 
covered, at his death, not long since, his estate was 
appraised at $15,000,000, all made out of the Callao 
mine. 

The Alvorado mine, in Mexico, shows how a poor 
peon became a multimillionaire in a few months. 

Comparing the chances for moderate winnings, 
who is there owing a fortune to luck in lottery 
tickets, yet how many thousands have made for- 
tunes in mining! This is demonstration that where 
legitimately conducted the chances of a winning are 



184 MINING INVESTMENTS 

very favorable to the mining venture and very un- 
favorable to the lottery ticket. 

In a lottery the chances of getting you the money 
back with perhaps a premium are as one in 218; on 
the same basis, a chance in 218 mines, the average 
result would be that only one would pay. No one 
would consider such a risk, yet this is precisely the 
proportionate average to be expected in purchasing 
218 tickets in the lottery schemes used as an illus- 
tration. It seems strange that the public is so often 
prejudiced against putting money in mining ven- 
tures even to a moderate extent. Those who have 
mining stocks to sell, or seek to organize private 
mining ventures, are much to blame for the develop- 
ment of this feeling, because they have invariably 
compared mining stocks to investments. Mining 
stocks should not be considered as investments, for 
when compared they make a poor showing; an in- 
vestment presupposes security, and a mining stock 
is a speculation. 

To interest people in mines explain the element 
of risk compared with the chances for a profit and 
let people know what they are buying. A mine can- 
not be considered on an investment basis till the ore 
bodies are proven and the profitable treatment of 
the ore has been accomplished. Stocks in mines rep- 
resenting these conditions sell so high that the 
chances for great winnings are very much reduced 
because the winning has been made, and naturally 
it accrued to those who bought while the mine was 
an untried venture, as all mines are at their opening. 

Proceed with caution in considering mining ven- 
tures, and try your luck in legitimate enterprises, 
risking only what can easily be afforded at hazard. 
Before staking any money, however, investigate, 



AND HOW TO JUDGE THEM 185 

and remember always that an undeveloped mine is 
not an investment but a hazard for a great winning 
or a total loss. Mining is a risk, however, in which 
science, skill and experience can be intelligently ap- 
plied to great benefit; and under such guidance the 
chances for a profit are favorable to the speculation. 
Mining is a speculation, but it is legitimate and 
honorable, and can result in unusual profits to com- 
pensate for the risk. Wherever a mine becomes a 
success it brings prosperity, happiness and steady 
employment to many people, and one such winning 
can compensate for many losses. 



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The Portland Cement Industry 
From a Financial Standpoint 

By EDWIN C. ECKEL, 

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until recently in charge of the cement work 
of the United States Geological Survey. 
The only book which shows the possibilities 
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CONTENTS 

I. The History of the Portland Cement Indus- 
try. II. The Growth of the American Cement In- 
dustry; Statistical. III. The Outlook for the 
Future. IV. Factors Influencing the Valuation of 
Cement Securities. V. The Methods and Profits 
of Cement Promotion — Impending Flood of 
Cement Securities; Profits of Cement Promotion, 
Their Source and Amount; Misstatements of 
Cement Prospectus Writers. VI. Capitalization 
of Cement Companies — Basis for Reasonable Cap- 
italization; Minimum Possible Capitalization; 
Maximum Satisfactory Capitalization; Actual 
Capitalization of Existing Companies. VII. Cement 
Bond Issues— General Status of Industrial Bonds; 
Bond Issues Against Established Plants; Bond 
Issues Against Unbuilt Plants; Typical Cement 
Bond Offerings; Security Offered for Bond Is- 
sues; Earning Power Back of the Security. VIII. 
Profits and Losses of Cement Manufacture — Ac- 
counts of a Lehigh District Cement Company; 
Accounts of a Michigan Cement Company; Divi- 
dends of Two Established Companies; The 
Chance of Success and Failure. 
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MOODY'S MAGAZINE 

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MAR 6 1912 



